(10 years, 4 months ago)
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The Parliamentary Under-Secretary of State, Wales Office (Baroness Randerson) (LD)
My Lords, the Bill before us today continues this coalition’s ambitious programme of reforms to devolved governance in Wales. We have already achieved the commitments in our programme for government relating to Wales, including delivering the 2011 referendum on full law-making powers for the Assembly and establishing the Commission on Devolution in Wales—the Silk commission—which has since published two detailed reports.
I pay tribute to Paul Silk and his commissioners, including my noble friend Lord Bourne, for their two excellent reports. The commission included representatives from all four political parties in the Assembly, and reached unanimous agreement on its recommendations. I hope that a similar spirit of broad consensus will exist in this House in respect of this legislation.
The Bill implements the vast majority of the recommendations that the Silk commission made in its first report, devolving an exciting package of tax and borrowing powers to the Assembly and Welsh Ministers. These reforms provide the tools and incentives for the Welsh Government to grow the Welsh economy; make the Welsh Government more accountable for raising some of the money they spend; and deliver borrowing powers that will enable Welsh Ministers to invest further in Welsh infrastructure.
I now turn to the detail of the legislation. The Bill provides for the introduction of a Welsh rate of income tax. As the Silk commission recommended, the devolution of income tax powers would be subject to a referendum, should the Assembly decide to trigger one. The devolution of income tax powers to Scotland was subject to a separate referendum question in 1997, and it is only right that people in Wales should decide whether income tax powers should be devolved to the Assembly.
Should the Welsh people vote for an element of income tax to be devolved—and I sincerely hope they will—it would provide a significant incentive for the Welsh Government to grow the Welsh economy and deliver a real-terms boost in revenue—money that the Welsh Government could then spend on key services such as health and education.
In the event of an element of income tax being devolved, the UK rates would all be reduced by 10p for Welsh taxpayers and the Assembly would set a single Welsh rate of income tax for all three income tax bands that would be paid alongside the reduced UK rates; this is the so-called lock-step mechanism. Noble Lords will no doubt be aware that the proposal has generated some intense debate, not least as the Silk commission recommended that the Assembly should be able to set separate Welsh rates of income tax for each of the three income tax bands.
The Government recognise that there are arguments for and against the lock-step mechanism, but we continue to believe that the approach set out in the Bill is appropriate for Wales. Given the porous border with England—almost half of the Welsh population and 10% of the English population live within 25 miles of the border—the changes to individual income tax rates in Wales could have wider effects than similar changes in Scotland.
It would not be logical to provide more flexible rate-setting powers in Wales than in Scotland. The Government have therefore decided that the lock-step is the best system for encouraging the Welsh Government to grow the overall tax base in Wales while safeguarding against the risks of damaging cross-border tax competition and increased tax avoidance.
We are now less than two months away from what I consider to be one of the most fundamental decisions in the history of the United Kingdom. I, along with almost every other noble Lord present, sincerely hope that the people of Scotland choose to remain united with the peoples of Wales, Northern Ireland and England. Nevertheless, the Government recognise that even a clear no vote may well lead to further income tax devolution to Scotland.
Having said that, we are not there yet, and I would not wish to pre-empt that debate. The Government remain open to revisiting the arrangements for income tax devolution in Wales as any changes are brought forward in Scotland; but, as I explained, there are differences between Wales and Scotland, particularly in the nature of their borders with England.
The Bill also devolves powers over stamp duty land tax and landfill tax to the Assembly, giving it the ability to devise a system of tax on land transactions and landfill specific to Welsh needs. That will provide an independent revenue stream for the Welsh Government to borrow against and give them additional tools to manage housing and waste management policy in Wales, both of which are already devolved.
The devolution of tax powers is intrinsically linked to the devolution of borrowing powers. In addition to powers relating to current borrowing, the Bill provides the Welsh Government with the ability to borrow up to £500 million to invest further in capital infrastructure in Wales. That is a generous limit, which reflects the independent income generated through the two devolved taxes, and which can be increased if additional taxes, such as an element of income tax, are devolved. Crucially, it will allow the Welsh Government to move on with much needed infrastructure investment, including improvements to the M4 around Newport.
The Government have been criticised for linking the borrowing limit to the income from devolved taxes. However, we have been clear that any borrowing must be contingent on the Welsh Government’s ability to pay that money back. You or I would not get a reputable loan without a means of repaying it, and Governments should be no different.
Finally with regard to fiscal reforms, the Bill devolves responsibility to the Assembly for its own budgetary arrangements, enabling it to decide how it wishes to scrutinise and approve its annual budget.
I now turn to Part 1, which includes a number of important electoral and constitutional reforms for Wales. Clause 1 deals with the move to permanent five-year Assembly terms. Noble Lords will recall that the scheduled 2015 Assembly election was moved to 2016 by the Fixed-term Parliaments Act 2011 in order to avoid it coinciding with the UK general election. The Bill makes the change to five-year terms permanent, following the Government’s 2012 consultation on future electoral arrangements for the National Assembly. This change will make it less likely that Assembly and parliamentary general elections will occur on the same day in future. I hope that we would all agree that it is important that Assembly elections are contested, wherever possible, on issues specific to Wales and are not overshadowed by wider issues that often dominate parliamentary elections.
The Bill also overturns the ban on candidates standing for election in both a constituency seat and on a regional list in an Assembly election. We are restoring the position to that set out in the Government of Wales Act 1998 and reversing the ban imposed by the then Labour Government in the 2006 Act. That change was made against the wishes of all the other major political parties in Wales and against the advice of the Electoral Commission and electoral experts in Wales. Noble Lords will be aware that, for Welsh Members of the Labour Party in the other place, judging by column inches in Hansard, this is seemingly the most important issue in the entire Bill. Important though this issue is, the Bill simply reverses a change that should not have been made in the first place. It restores fairness to Assembly elections, which the ban on dual candidacy took away.
The Bill also prohibits dual mandates between the Assembly and the House of Commons. The Government do not believe that it is possible for an Assembly Member to represent their constituents effectively and to devote their full attention to their role as an Assembly Member if they must also spend a significant portion of their time in Westminster. From now on, politicians elected to both legislatures will need to make a clear choice whether they wish to serve as a Member of Parliament or an AM. The Bill does not impose a similar prohibition on your Lordships, as we do not have the same constituency commitments or the requirement to attend this place regularly. At the request of the Welsh Government, this legislation also formally enshrines that name in statute. This title has been common parlance for the Welsh Assembly Government since the advent of full lawmaking powers in 2011 and it makes sense for legislation to catch up with the reality on the ground.
Finally, I would like to say a little about the second Silk report. The commission has made some crucially important recommendations about the future governance of Wales within the United Kingdom, most notably by recommending a move to a reserved-powers model similar to that in Scotland. The move would involve a fundamental, top-to-bottom change to the Welsh settlement and is not something which could be entered into lightly or done quickly.
In responding to the report’s publication in March, and while welcoming the report, the Government made clear that the Bill is not the right vehicle for implementing its recommendations. Let us implement the commission’s first report before we turn our minds to the second. Including a whole raft of additional powers in the Bill would serve merely to delay its progress and jeopardise its enactment in this Parliament. Much better that these matters be left for the next Government to take forward, giving all political parties the opportunity to seek the endorsement of the electorate through party manifesto commitments.
This Government believe that devolution should be used to give Wales a competitive edge. It should give its politicians the ability to make decisions for the people they serve, becoming increasingly accountable to them as a result. The Bill delivers on that. I commend it to the House and beg to move.
Baroness Morgan of Ely (Lab)
My Lords, I thank the Minister for outlining the shape and clauses of the Bill. The timing of the Bill is extremely sensitive, as the noble Baroness hinted, with this Second Reading taking place before the Scottish referendum and the Committee stage coming after that referendum. The Bill will therefore be a moving feast. The constitutional implications and the political response in Scotland, and in the rest of the United Kingdom, will need to be carefully considered after the referendum vote, irrespective of the outcome in September. It was interesting to note that the Minister stated that further discussion following the referendum will be possible on certain aspects of the Bill.
We also have a new Secretary of State for Wales in Stephen Crabb, and it was lovely to see him at the opening of this debate. While the previous Secretary of State, David Jones, seemed to have a rather ambivalent attitude towards devolution and despite the fact that the new incumbent has proclaimed himself in the past to be a self-confessed devo-sceptic, pleasingly he appears to have seen the light in recent weeks and has promised to develop a better relationship between the Government and the Welsh Assembly. We shall give him the benefit of the doubt and look forward to this being the case.
We are also entering a pre-election period where manifestos are being drawn up and there is an increasing awareness of the overcentralisation of the state in London. In addition, we are dealing in the Bill with recommendations that have been largely taken up as a result of the Silk 1 commission. Since then, however, Silk 2 has been published and it would seem strange not to take the opportunity to discuss some of the suggestions of that report. On the whole, I shall desist from that temptation although there is one notable exception, to which I shall allude later.
Before I start, however, it is worth pointing out what my motivation is and always has been in relation to devolution in Wales. As a founder member of the cross-party Yes for Wales campaign in 1997 and having then been on the team, along with the noble Lord, Lord Bourne, to draw up the initial standing orders for the Assembly, I was and am a lifelong supporter of devolution. I even remember wearing a sticker to school as a 12 year-old in 1979 in support of that doomed campaign when it took place. However, my motivation has never been rooted in any romantic, nationalist or even patriotic ideals. Neither is it controlled by a fixation on limiting the role of the state. Some would argue that this has been attempted in the Bill through the promotion of competitive taxation, which will inevitably lead to lower taxation across the United Kingdom and therefore a reduction in the size of the state. My motivation has always been to do what is best for Wales: making decisions close to the people, taking local circumstances into account and, crucially, ensuring that the people of Wales, particularly the poorest, are not left worse off.
Wales remains one of the poorest parts of the UK, although the unemployment rates are falling fast thanks to some innovative measures by the Welsh Labour Government. It is absolutely right that Wales continues to benefit from the UK Treasury receipts. The nature of the politics I believe in means that there should be a sense of social solidarity across the whole of the United Kingdom. In Wales, we have more of a sick population due to our industrial heritage, which helped to create the historic wealth of the United Kingdom. We also have a proportionately higher ageing population, many of whom have moved from England—and we happily welcome them to our beautiful country. Nevertheless, there is and has been hitherto a sense that these conditions and historic legacies should be recognised and that there needs to be a redistributive mechanism from the richer centre to the poorer periphery.
However, Wales has seen significant cuts in recent months and years. The IFS has suggested that the total block grant allocated by the UK Government to Wales in 2013-14 is 9.4% lower in real terms than it was in 2010. Further cuts have been announced for 2015-16 which, if implemented, would take the cut to 12%. There has been a 31% cut in the amount earmarked for capital expenditure. That cut in capital expenditure has been a severe handicap to the Welsh Government’s ability to invest in projects and infrastructure that could increase economic activity and grow the economy. Central to the Bill and the key reason why we in the Labour Party are anxious to support it is that, for the first time, the Welsh Government will have the power to borrow.
Let me underline, however, that it is critical that the ability to borrow should not be used by the Government in Westminster as an excuse to cut funding that should otherwise come to Wales. The focus so far has been on the need to borrow in order to invest this money on improvements to the M4 motorway. That commitment was announced by the Welsh Government last week and has received support, in particular from the business community. I believe that that is crucial, but we need to be sure that a similar project in the north of England, for example, would not have been funded out of this Government’s central pot once the Barnett formula has been taken into account.
The ability to borrow is crucial, but we would like to question in Committee why the level of borrowing allowed for Wales is so low. It has been suggested that the mechanism that determines the borrowing levels in Scotland has been used as a template for Welsh borrowing. However, we on these Benches shall argue that there has been an inconsistent approach, and that both Northern Ireland and Scotland have been allowed to borrow irrespective of the ability to raise the commensurate amount through their revenue-raising at a devolved level. Neither has the amount Wales is allowed to borrow taken into account the fact that Wales, in relative terms, has very little to make in terms of PFI payments compared to Scotland. Ideally we need a mechanism in this Bill to allow the Welsh Government to borrow more in future. We need to be assured that a degree of flexibility is allowed in relation to the conditions of borrowing. The ability to borrow, at least initially, is predicated on the fact that two specific taxes will be devolved to Wales: stamp duty and landfill tax. We can consider the benefits and disbenefits of these taxes in Committee, but it is worth noting that the nature of both these taxes is that they can vary considerably from year to year. There has been an agreement that, due to the nature of the variability, an adjustment can be made, but I would like to probe a little further in Committee on the nature of the adjustment deal and how watertight this agreement is.
The disbenefits are obvious. Being part of a larger group means that hitherto Wales has been pooling the risk with the rest of the UK. Probably the most controversial part of this Bill is the power to raise income tax, subject to a number of criteria. The previous Secretary of State for Wales argued, along with the Liberal Democrats, that he would be pushing for a 1p cut in income tax, suggesting that that would be a stimulant for investment and economic growth. He could well be right. However, reducing the Welsh rate of income tax by 1p, as suggested, would cost £200 million in terms of cuts to services. It will be interesting to see how the new Secretary of State feels about that, especially given that he has said that his,
“opposition to devolution … has been driven by a belief that … devolution would foster and feed an increasingly separatist and socialist discourse in which sensible Conservative policies that could promote national cohesion, economic liberalism and”—
note—
“smaller government would find little oxygen for survival”.
National cohesion is the last thing that we will see as a result of tax competition. Smaller government, however, would inevitably be delivered. Just imagine cutting 7,700 nurses, which is what £200 million represents, in the hope that the economy would grow. It could happen, but it would be a huge risk at the expense of central public services. It should be noted, however, that £200 million should also be set in the context of an overall budget for Wales of £15 billion. It must be said that that is pretty small change, and probably would have a negligible effect on the efforts to change the economic fortunes of the country.
Even if the economy did grow, much of that growth would return through income tax receipts to the central UK Treasury, and would go only some way to top up the payments to services cut in Wales. Let us not forget that only 4,000 individuals in Wales paid a top income tax rate of 50p in 2010-11, and that more than 90% of the people of Wales pay a basic rate of tax. The Government believe that devolution should be used to give a competitive edge to Wales, and that the powers devolved should be used to grow the economy. My fear with these figures, however, is that if we are to engage in any kind of tax competition with the rest of the UK, Wales will come out the loser. That is great if you are chasing some kind of nationalist dream of self-dependence; it is a disaster if you are poor and do not want your services cut. We want no race to the bottom. This would prove detrimental to all parts of the United Kingdom.
As the Minister has set out, there are cross-border implications of income tax competition. We would like to address the need for a comprehensive, cross-border Treasury impact assessment which takes into account the fact that 48% of Welsh people live within 25 miles of the English border, with 10% of the English population living within 25 miles on the other side; that is, 6.3 million people. It is worth contrasting this with Scotland, where just 4% of the population lives within 25 miles of the English border, with 0.5% of the English population living within 25 miles on the other side; that is just 450,000 people. The complexity associated with different tax rates, therefore, is much higher in Wales, both for employers and for employees.
We are also concerned that not enough has been done to calculate the cost of collecting tax in Wales. Again, we would like to probe further in Committee the indexation aspects of the impact of income tax changes to Wales. It is essential to underline the fact that Labour has a clear triple-lock system, upon which we would insist before embarking upon income tax devolution for Wales. First, there is of course a need to ensure a fair funding mechanism for Wales. Even with the Bill’s proposed devolved tax arrangements, 75% to 80% of the Welsh government budget will still be provided through the Barnett formula. We need to be sure that we are not locked into the current funding system, which would disadvantage the country for ever. Secondly, we would insist upon a period of assignment to ensure that Wales is not worse off as a result of any tax-varying powers. Thirdly, of course, none of this will happen unless the Welsh people vote for tax-raising powers for the Assembly. Having seen the lamentable turnouts for the European and police commissioner elections, and with the idea of a campaign on a question containing the word “tax”, I would not be volunteering to lead a referendum to promote this in Wales.
Other aspects of the Bill are also important. In the parts relating to electoral systems and frequency of elections, our principal position is that these should be matters for the Welsh Assembly to decide. The public are confused by a system which allows a candidate to stand on both the constituency ballot paper and the regional list ballot paper. Labour will be submitting an amendment to protect the status quo. The Explanatory Notes make clear that the measure will benefit small parties with a smaller pool of candidates, so there is undoubtedly a highly political angle to this, as there is to much of the Bill; my noble friend Lady Gale, who will be helping me out on the Bill, will elaborate on this point later.
We also believe that a shift to the “reserved powers” model of governance should be introduced at the earliest opportunity. We should not wait for Silk 2 to be implemented in a further Bill, but should address this issue now. Once again, the coalition Government have questioned the authority of the Welsh Government to make decisions in certain areas and, once again, recently, the Supreme Court has found in favour of the Welsh Government, ensuring that the Welsh Government have the right to protect vulnerable farm workers. These are costly, bureaucratic fights, which should be halted as soon as possible. We shall be proposing an amendment to include the reserved powers model for the Assembly.
Extra powers would mean extra responsibility for Assembly Members, particularly in the role of scrutinising expenditure. Although this would obviously be a matter for the Assembly, ideally we need an assurance that the personnel infrastructure and the expertise, both in terms of administration and scrutiny, are in place before handing over these powers. Assembly Members are already extremely stretched with 60 Members and I am sure that some noble Lords will want to pick up on this issue during the debate.
Overall, the Labour Party will be supporting this Bill. However, we will take the opportunity to probe and test various aspects of the proposals which we feel need further thought and consideration.
Lord Thomas of Gresford (LD)
My Lords, this Bill is introduced into the House at a very interesting time, with the Scottish referendum only weeks away. It provides centrally for the introduction of tax powers specifically to permit the Welsh Government to set a rate of income tax, subject to their first obtaining a favourable referendum vote. This is what the First Minister, Carwyn Jones, said about that last November:
“As a Government, we are not pursuing the devolution of income tax, certainly not at this time. The reason for that is we believe that income tax devolution cannot come unless there is reform of the Barnett formula. The funding basis for Wales must be solid first, before we can consider whether income tax devolution will be appropriate and right for the people of Wales”.
I noted that the noble Baroness, Lady Morgan, a moment ago said that she would not lead the campaign for income tax devolution. That continues to be the Welsh Government’s position.
There is a bit of curious thinking in the Labour Party about this, because the Scottish Labour Party’s commission on devolution report explicitly and repeatedly rejects proposals for a needs-based alternative. In an interview on “Newsnight Scotland” on 18 March last, Labour’s Scottish Leader, Johann Lamont, claimed that:
“The Barnett formula works for the United Kingdom”,
which is very different from what was being said a moment ago. She said it works for the United Kingdom, not for Scotland. Well, Labour received its comeuppance in Scotland in the last Scottish Parliament election.
One of the problems—
Lord Richard (Lab)
The noble Lord provokes me slightly, since I chaired the commission on the Barnett formula in this House. Is the noble Lord in favour of the Barnett formula remaining in its present form for Wales? Is the Liberal Party in Wales seriously suggesting that the way in which the Barnett formula is calculated at present should remain in that state?
Lord Thomas of Gresford
The noble Lord knows perfectly well that the Liberal Democrats are for the reform of the Barnett formula and always have been. I can give that assurance. I am just puzzled to hear what is said by the Scottish Labour Party, which obviously prefers the current arrangements.
Lord Thomas of Gresford
The Scottish Liberal Party has been merged with the Scottish Liberal Democrats. I am not going to go any further into that.
The problem with devolution in Wales is that a Labour Government continuously in power—either on their own or as the lead party—escape accountability for their failures for a number of reasons. First and fundamentally, the essential link that all democratic Governments should have between raising resources through taxation and spending those resources on policies is missing. This Bill goes some way to dealing with that particular problem.
Labour’s demand for more money from the central government from a reform of the Barnett formula before they dare put these taxing powers to a referendum, is like Oliver Twist’s, “Please sir, can I have some more?”. It is Labour’s excuse for condemning Wales to fall behind in education and health, as it does, not merely judged by UK comparisons but also against international comparisons. Any very proper criticism of those failures is said to be “a war on Wales”—an empty piece of rhetoric first used by Carwyn Jones himself at the Welsh Labour Party conference in Llandudno in March.
Just as Labour seeks to delay the introduction of a Welsh income tax, so in the House of Commons debates on the Bill Labour sought to delay the introduction of the borrowing powers by waiting for a report on the legislative steps necessary to move to a model of reserved powers for the Welsh Assembly. I heard with interest the noble Baroness say that an amendment will be proposed to bring in reserved powers as the model in the Bill, and look forward to seeing how that is expressed.
The second matter that concerns me is that the recommendation of the Richard commission 10 years ago that the number of AMs should be increased to 80 to improve scrutiny within the Assembly was not pursued. The recommendations of the Silk 2 report, as the noble Lord will no doubt have noted, are that:
“A range of options should be considered in the short term for increasing the capacity within the existing National Assembly, including greater flexibility on the number and size of committees, increased numbers of research staff and better use of Assembly Members’ time. … The size of the National Assembly should be increased so that it can perform its scrutiny role better. The practical implications, and those for the electoral system, will need further consideration”.
The third matter that concerns me is that the press and media in Wales allow a dominant Labour Government to get away with it. Take the desire and the ability of the press in Westminster to tear Ministers limb from limb on a daily basis—for example the spat between Theresa May and Michael Gove over extremism in schools—and compare it with the deferential approach of the Welsh media over the very recent abject dismissal of Alun Davies, the former Welsh Government Natural Resources and Food Minister, for gross misconduct. One wonders whether the politicians and the Welsh media are too closely aligned and too ready to exchange roles.
I return to the Bill. I welcome the proposal to remove the current restrictions on individuals standing as a candidate for both a constituency seat and a regional seat. Studies by the Electoral Commission have shown that the current prohibition has a disproportionate impact on smaller parties, because they have a smaller pool of potential candidates from which to draw. The proposal to prohibit MPs from sitting as Assembly Members, and vice versa, is also welcome. It has an interesting history. Back in 1998, as the then Welsh spokesman for the Liberal Democrats I was lobbied from the very steps of the Throne by Mr Ron Davies Member of Parliament, the then Secretary of State for Wales, to give our party’s support to an amendment to the Government of Wales Bill which would permit him and others to have a dual mandate. At the time, it seemed reasonable to have some experienced politicians in the new body we were setting up, and so we agreed. However, I think that with the experience of the years that have passed it is time to end that practice.
I will raise another issue during the passage of the Bill. Much was made of the fact that two of the Lib Dem candidates in the last Assembly election were disqualified from being Members because they belonged to various public bodies, one of which was the Care Council for Wales. On the complaint of a Labour Party Member, they were interviewed by the police on an allegation that they had knowingly made a false statement in a document in which they gave their consent to being a regional party list candidate at those elections. That was translated into being disqualified from nomination.
The confusion arises because, under the Local Government Act 1972, a person is disqualified from being elected as a member of a local authority, whereas Sections 16 to 18 of the Government of Wales Act specifically say that:
“A person is disqualified from being an Assembly member”.
Of course, elections to local government are on the first past the post system; elections to the Welsh Assembly are done on both a constituency and regional basis. The regional election is in accordance with a party list. It is ludicrous to require a person on a list, who might not be first with a chance of election but second, third or fourth, to give up public service on a public body, very often unpaid, just to be a candidate. Although Liberal Democrat candidates were highlighted last time, I am aware that members of other parties stood as candidates, but were not elected, who might have been subjected to the same treatment. A successful candidate in an election ought to have a period in which to resign from any body that would disqualify him from being an Assembly Member—maybe eight days. I shall accordingly seek to amend Section 16 of the Government of Wales Act 2006 to make that position absolutely clear.
The aftermath of the Scottish referendum will, in all likelihood, see changes in Scotland. I was delighted to hear from the Minister that the situation in Wales will be revised; in particular, the lock-step will be looked at again. The structure of Welsh devolution is not yet satisfactorily settled. Once the Bill is passed as a further step, the focus in Wales will turn to the recommendations of Silk 2. The Liberal Democrats, who accept all its recommendations, will be here to return to the fray in the next Parliament. For the moment, I look forward to the fray in the Committee stage of the Bill.
Lord Wigley (PC)
My Lords, this is the third Wales Bill since the 1997 referendum. The second Silk report will no doubt require a fourth Bill and developments in Scotland, as we have just heard, may well trigger even further legislation. Indeed, I feel that the issues in the Bill are ones that I have lived with for most of my life. I was involved in the legislative processes in another place on the ill-fated Wales Bill 1977-78, as were a number of colleagues here today, on which the noble and learned Lord, Lord Morris of Aberavon, and my noble friend Lord Elystan-Morgan worked so very hard. Indeed, I was involved in the Wales Bill 1998, which became the basis of the National Assembly in the present settlement. Back in 1970, I also gave evidence to the Crowther commission, as it then was, which became the basis of the Kilbrandon report of 1973. I gave further evidence, as an elected Member of the National Assembly, to the Richard commission of 2003. That, of course, led to the 2006 Act, which will be amended by the Bill and was the basis of the 2011 referendum and the advanced settlement that we got subsequently. The issues and I go back a long way, and I have the scars to show for it.
I first want to thank, as an individual and on behalf of my party, Plaid Cymru, Paul Silk and his fellow commissioners for their hard work. I pay particular tribute not only to my colleague, Dr Eurfyl ap Gwilym, the Plaid Cymru representative on the Silk commission, but to the noble Lord, Lord Bourne, who, as the Conservative voice both on the commission and previously in the National Assembly, managed to bring his party to play a positive role in the new post-devolution Welsh politics.
The Silk commission’s efforts in coming to grips with an immensely complex subject—particularly in its first report, which is the basis for the Bill—deserve to be rewarded by the way we enact consequential legislation. Indeed, I believe that our starting point today should be to accept that the Silk commission worked very hard to reach a consensus involving much give and take, and that, as such, it presented a balanced report that should be accepted and taken forward as a package and not cherry-picked. I say that because all political parties had to compromise on their party programmes and a united, unanimous report was secured only on that basis. Naturally, my party, Plaid Cymru, would have liked to have gone very much further. We aspire to the maximum possible degree of independence for Wales within a framework of a united Europe with its free movement of people, goods and capital, which inevitably imposes some constraints on the degree of independence that any country has.
Unlike the Calman commission in Scotland, our Silk commission succeeded in getting all-party acceptance that there would have to be some compromise so as to get implemented at an early stage those changes that all parties saw as necessary in order to make the Assembly a more effective body and the Government of Wales more transparent and democratically answerable for their actions. That is why, even at this late stage in the Bill’s parliamentary journey, I urge that we look at whether we can implement the entirety of the Silk package. In that regard, I noted the point made by the noble Baroness, Lady Randerson.
Since the publication of the Bill, the Silk commission has brought forward its second report on the legislative powers to strengthen Wales, and in some ways it is difficult to differentiate between the two. Indeed, some have suggested that the reports are in the wrong order. An old saying that I found very apposite in the world of industry as much as in the world of government is that “form follows function”. The function of the National Assembly is dependent on the model of devolution—it would be somewhat different if Wales had a reserve-powers model such as that of Scotland and Northern Ireland—and inevitably that impacts on the transparency and accountability of the Assembly. The range of devolved portfolios will dictate the size of the budget, and the nature of those portfolios and the extent to which they lend themselves to policy variation in Wales compared with England will dictate the degree of budget flexibility that is needed. In addition, the degree of responsibility deemed appropriate for a Welsh Executive in largely non-legislative matters, such as economic stimulus management, will determine the balance between capital and revenue responsibilities.
I have deliberately tried to set my remarks in the context that I have for the very reason that we must formulate the financial powers needed to strengthen Wales with regard to the responsibilities of providing adequate enabling resources and ensuring proper answerability. In order to deliver the legislative, executive and administrative agenda that the Welsh Government will have as their responsibility, they need to be clear about the powers that they have. That of course is the agenda that the Welsh people expect to be arranged for their needs and expectations to be answered.
I believe that we shall have to make certain assumptions with regard to those non-financial matters as a basis on which we can reach meaningful conclusions regarding finance and the adequacy of the Bill. For example, the linkage between the budget and expenditure, and hence the resources needed, and the democratic need for the Government’s performance to be judged by the electorate requires both financial transparency and resource flexibility. I shall give a concrete example. If the NHS in England were privatised, as some politicians on the right advocate, and if the Welsh Government, having full legislative responsibility for the NHS in Wales, wanted to follow a different path, they would have to have a significantly different financial and fiscal freedom from the one they have at present for that to be a meaningful policy option.
I turn to some specific aspects of the Bill that will no doubt warrant our attention in Committee. In Part 1, I certainly welcome the removal of the restriction on dual candidacy and a return to the original settlement of the 1998 Act. It was, quite frankly, a piece of naked party-political jiggery-pokery by the Labour Government to have removed it, and they should be ashamed of themselves for having tinkered with the constitution for party-political advantage. I hope that we can have an assurance from the Labour Front Bench that never again will they resort to such unworthy action. If that assurance is not forthcoming, we should build into this Act a provision that any further change to the electoral system of the Assembly should be implemented at Westminster, if indeed it has to be done at Westminster, only if it carries a two-thirds endorsement by Assembly Members.
With regard to the Assembly’s election and membership, I am totally convinced that the Assembly cannot do an effective job with its new, enhanced powers since the 2011 referendum without a larger membership. That becomes an even greater requirement with the additional financial scrutiny that will emanate from the Bill. I believe that there need to be at least 100 Members to do an adequate job. Might I suggest that if we are not to have an STV model of election, which I favour, we should consider each of the current 40 Assembly constituencies having two Members for each seat, with one man and one woman elected in each, thereby largely overcoming the question of gender balance that has been a problem for some parties over the last few years? Primarily I believe that this is something that the Assembly itself might consider as any such initiative should come from Wales and not be imposed by Westminster. I hope that the Government might be amenable to giving the Assembly full powers over the electoral system.
I am, incidentally, aware that in the Commons Report stage, Labour proposed taking steps towards a reserve powers model, to which the noble Baroness, Lady Morgan, referred earlier, and I heartily endorse that. But inexplicably, it linked this to a delay in implementing Part 2 taxation powers, which I could not understand. I hope that when this matter comes to Committee we shall be able to consider the pressing need for Wales to have a Parliament based on the same reserve powers as underpins the Scottish Parliament and the Northern Ireland Assembly, without unnecessarily linking it to delaying the taxation powers.
With regard to the taxation powers in Part 2 of the Bill, they are very modest indeed—so much so that I personally had some doubt about whether they warranted a referendum. However, I accept that that was part of the Silk recommendation. In the spirit of accepting Silk as a package, and not cherry picking, I accept that that referendum may be necessary. But, for every small change in relation to the government of Wales, we cannot have referendum after referendum. The House of Commons is elected and this Chamber is appointed to do a job of work, and we have to take that responsibility. In that spirit I urge the Government to reconsider their rejection of the Silk proposal on tax rates being varied in each band, to which reference has already been made and signals given that we are moving in the right direction.
The Government’s insistence on having a straitjacket of lock-step provision in the Bill undermines, at a stroke, the flexibility of the Welsh Government to use the new tax-varying powers in a radical fashion. They could not, for example, reduce the top rate by 5p, say, to make Wales a more entrepreneurial-friendly place, at a modest cost in terms of forgone income without reducing the standard rate proportionately—a totally impossible and unsustainable action. The irony, as I have no doubt the government Front Bench are very much aware, is that in Scotland, where the Calman commission insisted, I believe, in having a lock-step model, the Government in their move towards a devo-max situation as part of buying off the yes vote in the Scottish referendum are now talking about scrapping the lock-step, as recommended by the Strathclyde commission, and indeed personally endorsed by the Prime Minister. I am grateful to the Minister for indicating that the Government will indeed look again at this, and there may be a possibility of doing something about it in Committee or on Report.
I welcome the provisions of new Section 116C to be inserted in the Wales Act, allowing new devolved taxes. Some work needs to be done in the Assembly to see how that can best be used. I shall now say a word about the workings of the borrowing powers, which appear in Clauses 20 and 21 of the Bill. I understand that until a further referendum is held the Assembly’s borrowing powers will be capped at £500 million, which frankly is chickenfeed, and totally inadequate to deal with Wales’s economic problems. This is insufficient even to fund the M4 improvements around Newport, which will cost more than £900 million.
Will the remainder of that capital have to be funded from the already truncated capital budget of the National Assembly, leaving virtually nothing for any other capital projects—hospitals, schools, roads, sea defences—needed around the rest of Wales? It seems, quite frankly, as if the Welsh Government’s hands are being tied by Westminster in order to deliver London’s objectives and priorities, not the balanced capital programme needed by Wales. The Assembly should have an accumulated borrowing capacity of £2 billion over and above the M4 costs and we should address that question in Committee.
I have dealt with what is included in the Bill but I cannot let it pass without noting what is not included. In its introduction, on page 3, the Silk report comments that:
“Consideration of the Holtham Commission’s proposals for funding reform in Wales … was excluded from our terms of reference. These issues are being taken forward through a separate bilateral process between the UK and Welsh Governments”.
That is the elephant which cannot speak its name in today’s debate but whose shadow makes a sham of pretending that this Bill deals with the central financial question facing the Welsh Government—that is, the persistent, chronic underfunding as a result of the mindless, myopic adherence to an outdated and discredited Barnett formula, which has left Wales, since 1999, with a cumulative shortfall of £6 billion in its finances. This has led to the underfunding of the NHS, schools and local government in Wales, and neither party of government has had the courage to put that right.
In recommendation 12, Silk stated that if the UK Government were to agree to devolve corporation tax to both Scotland and Northern Ireland, the same powers should be given to Wales. Will the Minister confirm that if corporation tax is indeed devolved to Scotland, it will also be devolved to Wales? If so, why is there no order-making mechanism within the Bill to avoid having to get yet further primary legislation to handle the matter?
The real inadequacy of the Bill will become glaringly obvious after Scotland’s independence referendum in September. If Scotland votes yes—as I and my party hope—the relationships of the residual United Kingdom will have to be fundamentally reassessed. Even if Scotland votes no, partly as a result of the blandishments offered by the parties in Scotland to head off a potential yes vote, those commitments will need to be incorporated into the election manifestos of the UK parties, otherwise we could well see a bitter backlash in Scotland, with perhaps 20 or 30 SNP MPs holding the balance in the new Parliament.
That has a significant implication for Wales and for the adequacy of this Bill. The Bill we are debating today may well be seen, by the time we get to Committee, as a vehicle that must grow into an enabling Act relevant to the post-referendum world we shall then inhabit. It is in that context that I support a Second Reading.
Lord Morris of Aberavon (Lab)
My Lords, I welcome the Bill as a major step forward in the long-running saga of the principle of giving more power to the people of Wales, where it rightly belongs. Depending on the length of this debate, I apologise in advance if I miss one or two speeches as I have to preside at an event of interest to Welsh lawyers at the Supreme Court, regrettably clashing with the change of date for this debate.
We have come a long way since I introduced the Wales Bill in the Commons in November 1977—I thank the noble Lord, Lord Wigley, for his reference to it—and longer still since the 1950s, when I discussed Jim Griffiths’ remit to Lord Prys-Davies to put on paper a model for an elected council for Wales, the first practical step, a foundation, upon which we developed as a party and delivered—indeed, the only party that can deliver at Westminster.
In 1974 my party was split. We had not sufficiently prepared Wales for the momentous task of choosing the way forward in a referendum. In the past, the Conservative Party has fought resolutely against giving any power to Wales, from the setting up of even a Secretary of State’s office. The last Secretary of State kept a very low profile on the Prime Minister’s last visit to Cardiff. Not a few years ago, he was advocating in the Assembly that no taxation powers should be given. I surmise that the change of heart of many Conservatives in Cardiff owes a great deal to the noble Lord, Lord Bourne of Aberystwyth. I thank him and his fellow commissioners on the Silk commission. We are all devolutionists now: or, should I say, mostly all?
In 1998, Lord Callaghan told this House,
“that the age of small nations has arisen as a kind of backlash to what is happening globally”.—[Official Report, 21/4/98; col. 1056.]
I wish the new Secretary of State well, despite the Prime Minister’s inflammatory comments at the Royal Welsh Show yesterday. I just missed him, as it happens. The Secretary of State’s first task, when he sits down during the recess, is to find ways of bringing the war of words between Westminster and Cardiff to an end and, despite the approaching 2015 election, find ways of working with the First Minister for the better governance of Wales. The Prime Minister is not encumbered by past battles and should have shown leadership and a way forward. We all have to deliver on our priorities. Sometimes they can be right and sometimes they can be wrong or improved upon. Given the problem on both sides of Offa’s Dyke, the administration of health and education cannot be perfect in today’s conditions. If there were no problems with the health service in England, which we read about, day after day, week after week, perhaps it would be allowable for the pot to call the kettle black. However, this is not so and there are problems on both sides of Offa’s Dyke. The more we learn from each other, the better. The whole idea of devolution is that we can be different and learn from each other. From plastic bags, at the bottom end of the scale, to experimenting in a small way with administering the health service, Wales can learn from England and vice versa.
It is interesting that the 2015 general election will be fought, in Wales, on matters not within the province of Westminster MPs. I was aghast when a Welsh Assembly Member is reputed to have said that it was constitutionally inappropriate for a Welsh MP to give evidence to an Assembly committee on a devolved matter. I gather that my right honourable friend Ann Clwyd has now given evidence. Likewise, a Welsh Minister is reputed to have refused to give evidence to a Commons Select Committee. I have consulted the Clerk of this House and the contention of inappropriate behaviour is without any foundation. The sooner we learn that Wales and England are interdependent, not independent, the better. Only two years ago, I travelled to Cardiff, at the invitation of an Assembly committee, to give evidence. Since then, I have received another invitation. I am pleased that the thrust of most of my earlier evidence was accepted and I am delighted at the proposal to grant modest borrowing powers to the Assembly. Perhaps the noble Lord, Lord Rowe-Beddoe, can remind us what the borrowing powers of the WDA—which I created—were. He will be able to say better than I but, looking at it as a whole, they are modest. I congratulate the Assembly Government, and their most effective Business Minister, on being decisive in their proposal to use some of those borrowing powers to invest in better communications around Newport. We all suffer from being held up by the problem there: I do so week in, week out.
When I became Secretary of State, not a spade was being dug to further the M4. I maintain my firm belief that the secret of Wales’s prosperity is good east to west communications. I spent many long hours—including once on a long business trip to Japan—expediting the planning process for the A55 in north Wales. In that time, I agreed the line of the road but, unfortunately, I had to defer the problem of Conwy because of the lack of evidence on the practicality of a tunnel. Eventually, the evidence was forthcoming and my successors—I congratulate them—built the A55. Good east to west communications in south Wales and north Wales are crucial. If the Newport bottleneck is tackled, other problems will be seen and dealt with in north Wales. It is a matter of availability of resources and I firmly believe that this is the way forward. This is why, in my time, I rejected grandiose economic plans for the whole of Wales. In the north, there would be very little interest in what was being done in the south and vice versa. What was important was communicating with the markets in England.
I am less enthusiastic about the detail of taxing powers in the Bill. My bottom line is that, whatever taxes the Welsh Assembly raises—at its peril—Wales must not lose out in any Treasury subvention. Taxation does go with representation, so there is a lot going for the principle, but the end result must be clear and untrammelled by unnecessary restrictions. However, it should follow and not precede reform of the Barnett formula. I was there on day one when the noble Lord, Lord Barnett, on the back of an envelope, conceived the idea of the share of the money I should have. It was never intended to be a formula and it has never worked as a just way of allocating resources. Governments —particularly my own, I fear—did not attempt the reform. I ask, rhetorically, whether this was because Scotland was gaining so much more from it than Wales was. It should have been reformed years ago. Whatever Government are in power after 2015, it is essential that that is tackled now.
Before I close, I will make one fundamentally important point, which has already been referred to. The Bill’s weakness is that it is yet another manifestation of a drip-by-drip granting of new powers to Wales. Surely there is a better way of utilising parliamentary time, despite what the Minister has said. The time has come for the adoption for Wales of something similar to the original Scottish model of the transfer of all powers, save those that are reserved to Westminster, with further consideration to the Scottish position after the referendum. The constitutional position would be clear and the boundaries of powers would not need updating every few years. It would avoid the Attorney-General marching, metaphorically, up and down Offa’s Dyke, acting as a policeman to ensure that the Welsh Assembly did not exceed its powers, a role which I created in 1977. The last Attorney-General was trigger-happy and only last week came unstuck before the Supreme Court. His intervention seemed to lack an understanding of the purpose of the granting of a particular power and that is where he went wrong.
After we have examined the mechanics of the Bill, which should pass, we should, after 2015, concentrate on the granting of a settlement based on the reserved powers model. I cannot emphasise that too much. The next Government should then set up a constitutional convention, a body with a membership even superior to and with more clout than the Kilbrandon commission, the genesis of Scottish and Welsh devolution—perhaps party leaders might even serve on it—to examine the sheer unevenness of the constitutional arrangements for Scotland, Wales and Northern Ireland, how devolution is still largely unrecognised and ignored in the workings of Westminster, and the future roles of both Houses of Parliament for the devolved assemblies.
Lord Bourne of Aberystwyth (Con)
My Lords, it is a great privilege to follow the noble and learned Lord, who has unparalleled experience in these matters. I found myself in agreement with much of what he said. I also join the noble Baroness, Lady Morgan, in saying that it was a great pleasure to see the Secretary of State here for the beginning of the debate. It signals a close working relationship with us and indeed with the Welsh Government in Cardiff, perhaps underlined by the fact that he attended the First Minister’s reception yesterday. I think that is a sign of things to come. I do not think that the jury is out: I think it is going to be a good, close working relationship.
The Bill is in three parts. I do not propose to deal with one part for very long, except to say that it deals with the housing revenue account debt. I do not think anybody else has dealt with that either. It is largely non-controversial. I will first say a few words about Part 1, which deals with matters that were not at all within the purview of the Silk commission—namely, electoral arrangements. First, moving to a five-year fixed term now that the UK Parliament is on a fixed term makes a lot of sense. The party leaders and indeed the parties in the National Assembly welcomed it and we should as well. The ending of the dual mandate with the House of Commons also makes sense. There are some transitional measures there for people who move from one body to another so that they are not automatically disqualified from the other body. Once again, these are sensible.
What seems to be controversial, at least with the Labour Party, is the return to the process that the Labour Party introduced, which it now says people find confusing, of allowing people to stand both on a regional list and for first past the post constituencies. I would like to see the evidence that the people of Wales are confused by that. I do not have such a low opinion of the intelligence of the people of my country as to believe that. There is no evidence to suggest that anybody is confused by that. It is perhaps even more insulting that the Labour Party did not seem to think that the people of Scotland were confused by that because, at the same time as the Labour Government were changing it for Wales, they kept it for Scotland, where of course they had regional Members. When they changed it in Wales, they did not have any regional Members. If it were not the noble Baroness putting this forward, it would smack of hypocrisy, but I know her well enough to know that the opposition that she is putting forward is probably tongue-in-cheek. It makes sense to permit this and allow people to vote as they wish to vote.
Turning to the part of the Bill relating to Silk Part I, the taxation and borrowing powers are largely but not exclusively an adoption of Part I of the Silk report. I welcome what the noble Lord, Lord Wigley, said about the consensual nature of that. I particularly commend him for the lead that he has always taken in Plaid Cymru, and that Eurfyl ap Gwilym took as the representative of Plaid Cymru, in ensuring that we developed a consensus. It was not perhaps as difficult as he has suggested. I well remember that in Scotland Eurfyl ap Gwilym was mistaken for the Conservative representative because he was far to the right of me on many economic policies when we met the trade unions. It is sometimes surprising how these things develop. It is also important to note that the Labour Party was represented on Part I by a much respected and very able former Finance Minister, Sue Essex, who worked extremely hard, as did Rob Humphreys for the Liberal Democrats. The consensus building on Part I and indeed Part II was not that difficult. If we are able to capture that same capacity to move forward together within this House and the House of Commons, that will be all to the good.
Looking at the various taxes that are dealt with in the Bill and were dealt with by Silk Part I, the proposals on landfill taxes have been accepted, as have those on stamp duty land tax. The difficulties on aggregates tax were largely to do with the European position, and when we recommended devolution of that we put in the caveat, “Subject to this being solved in relation to European constraints”. We recommended that air passenger duty should be devolved for non-stop or direct long-haul flights. I regret that that has not been the case. I anticipate that the noble Lord, Lord Rowe-Beddoe, will deal with that when he speaks. I am disappointed in that regard.
The other difference is on income tax—not with the proposals on the bands so much as the lock-step. The amount on the bands is the same but we recommended the scrapping of the lock-step, which I thought was a good thing. Of course, there is lock-step in Scotland and we have to see that at the moment everything is looked at through the prism of Scotland, as noble Lords have said. It may look very different after the Scottish referendum, as my noble friend the Minister suggested. I do not agree but I can understand the Government’s position on that.
In relation to borrowing, I suppose we would all want more borrowing for Wales but we should note that this is a significant step. It goes further than what the Labour Party achieved in its period in government. For all the complaining about lack of progress on the Barnett reform—I wish the noble and learned Lord had grabbed that envelope and torn it up when it was being scribbled on in front of him; it might have saved us all a lot of trouble—and the gnashing of teeth on the other side, no progress was made on reform of the Barnett formula while Labour was in government. To be fair, I think the present Finance Minister in the National Assembly, Jane Hutt, has acknowledged that; in discussions with my right honourable friend Danny Alexander they have made progress on reform of the Barnett formula, although clearly there is still some distance to go on that.
I note what the noble Baroness, Lady Morgan, said about not leading the campaign for income tax powers in Wales. I must say, since she seems to regard those powers as pretty much akin to killing blue-eyed babies, we should be grateful that she is not going to be leading that campaign because, on the basis of her speech today, I do not think she would convince many people. But this gives power to the people of Wales, for us to do things differently based on having some independent tax-raising powers—new taxes, as the noble Lord, Lord Wigley, mentioned. These are things that we should be seizing.
Yes, there are some deficiencies in the Bill but it is a massive stride forward and we should acknowledge that and try to move forward in the spirit of consensus, as we have done so far on these issues, in marked contrast to Scotland. No doubt the position will look different after the Scottish referendum, but that does not mean that we should not grab this opportunity and move forward because otherwise we will get left even further behind. On that basis, the Bill deserves our support and then close scrutiny in Committee.
Baroness Humphreys (LD)
My Lords, I add my voice to those who have welcomed the provisions in the Bill. In doing so, I pay tribute to the contributions of my Liberal Democrat colleagues, in both Cardiff Bay and Westminster, who insisted on the inclusion of a commission to examine the devolution settlement in Wales in the coalition agreement. Their foresight has resulted in this opportunity to strengthen the constitutional arrangements for the National Assembly for Wales.
When the National Assembly opened in 1999, the limited powers and responsibilities it was given resulted in it being labelled a talking shop, and I would probably be correct in saying that many of us who were there at the time would agree with that description. I was certainly struck in those early days by the difference between the Welsh and Scottish constitutional settlements as I sat in the Scottish Parliament and, with a great degree of envy, watched MSPs debate a piece of primary legislation to create the first national park in Scotland.
Thankfully, the situation in Wales has moved on, and whether we agree with some of the decisions of the Welsh Government or not, it is absolutely our responsibility as we debate this Bill to distinguish between the Labour Government in Cardiff on the one hand, and the institution which is the Senedd on the other, and to ensure that its constitutional framework allows the Senedd itself to carry out its functions properly.
This Bill has much in it that many will see as a sensible way forward—Members have already referred to them—including: the change to a five-year term in the Senedd to avoid clashes with parliamentary elections; the banning of double jobbing, where Assembly Members retain their seats in the Senedd if they become MPs and vice versa; and the renaming of the Welsh Assembly Government as the Welsh Government—clearly focusing on the difference between the Government of the day and the institution itself. All of those are to be welcomed.
The issue of dual candidacy will, of course, engender debate and I look forward to contributing to that debate as the Bill progresses through this House. Perhaps it will be enough to comment, at this stage, that no other democratic country that operates an additional member system as a means of achieving a proportional result has placed a ban on dual candidacy. That Wales remains in the same category as South Korea, Taiwan, Thailand and Ukraine—surely not the best examples of democracy at work—casts a shadow on the fairness of the system underpinning our Senedd. Critics of the ban on dual candidacy have observed that:
“The biggest single public concern about the operation of the Assembly is a concern about the calibre and life experience of Assembly Members. Dual candidacy does at least help all parties to secure the election of their best people”.
Debates at future stages of this Bill may also present us with the opportunity to address the issue of closed lists for the regional aspect of elections, introduced by the party opposite when it was in government and operational in the 2011 Assembly elections. Reversing this situation and reintroducing an open list, where names of candidates as well as parties appear on the ballot paper, would re-establish that link between lead candidates and their electorates.
I said earlier that this Bill will ensure the framework to allow the Senedd to properly carry out its functions, but I wonder whether it goes far enough. This Bill does not deal with aspects of Silk 2 which many would argue we should take the opportunity to include. The new fiscal powers envisaged for Wales—the design and arrangements for schemes to collect stamp duty tax and landfill tax, for example—present the Welsh Government and the Senedd itself with many challenges.
The other elephant in the room is, of course, the size of the Assembly. In its publication, Size Matters, the Electoral Reform Society argues that the size of the Assembly is a matter which is,
“too important to be left to the politicians”,
but it is surely we, as politicians, who will have to make the final decision. There is a need to open the debate on the issue and examine the arguments in a logical and unbiased way, with the goal of strengthening the effectiveness of the institution that is the Assembly.
With 60 Members at present, the Assembly is smaller than almost half the unitary authorities in Wales. In the years leading up to the formation of the Assembly, none of the recommendations about its size fell below 75, with most recommending 100. With an Executive of 12, the remaining Assembly Members already experience difficulties fulfilling an effective scrutiny role alongside their other duties and their workload is heavier than that of Members in Westminster, Holyrood and Stormont. Perhaps the assertion made by the Electoral Reform Society that good scrutiny saves money is one worthy of debate in this Chamber. But these are issues for another time—perhaps even in the next stages in this Bill.
The Bill before us today seeks to strengthen the constitutional arrangements for the National Assembly for Wales and to introduce a new funding framework which will empower and enhance its accountability. Perhaps it is pertinent to remember that these recommendations are not the result of some political dogma but come from, and are underpinned by, the recommendations of a commission that consulted with the people of Wales—a theme to which I will undoubtedly return in future stages of this Bill.
Lord Morgan (Lab)
My Lords, perhaps I should declare an interest as a member of the King’s College group which has produced a plan for a written constitution, currently being considered by the House of Commons constitutional committee. I cannot, I am afraid, declare an interest in the House of Lords Constitution Committee because I have been kept off it.
I therefore speak from the Back Benches with the independence that that conveys, and do so by giving the Bill my very strong general support. As has been pointed out by other speakers, it is a remarkable change for the Conservative Party, which opposed devolution and primary legislative powers, and the former Secretary of State, who spoke against the Assembly having taxing powers. So when the Prime Minister in Cardiff recently declared that this is a Government who believe in Welsh devolution, that was a very remarkable conversion worthy of events on the road to Damascus a long time ago.
This Bill has many excellent features from the small—like the name of the Assembly Government—to implementing the bulk of the first report of the Silk commission on taxation. One concludes that we have a coalition Government of repentant sinners—who, we are told in the good book, have a better than even chance of entering the kingdom of heaven.
I want to say something briefly about the Assembly and its character and a little about the policy it should pursue. I pray in aid not a Welshman but a Scotsman, Gordon Brown, whose contribution to the Scottish independence debate has been outstanding, and who has many important things to say in his latest book on the constitution more generally.
It is clearly important that the powers of the Assembly should be revised. It was a big conceptual mistake that the Welsh Assembly did not have reserved powers from the very beginning. It had the drip-drip of conferred powers. No intelligent reason was given why this should not be done as it was in Scotland. I do not think, with respect, that any intelligent reason has been given this afternoon. It seems to me that it is bound to happen as part of the wider constitutional changes which the noble Lord, Lord Wigley, has said will follow the Scottish referendum whatever the outcome is. As the Silk report has said, it would make matters clearer and make for greater coherence and consistency. It would also bring out the meaning of what devolution actually is. It is really rather humiliating to have powers determined for you by another assembly. I think that this would strengthen the Assembly, and would make the Welsh Assembly as Gordon Brown would wish to see the Scottish Parliament—namely an entrenched, permanent part of an updated constitution, and an updated written constitution, I hope. I hope to see that and, as people have said, for that to be treated as a matter of urgency.
On the size of the Assembly, I agree with the noble Baroness, Lady Humphreys, that 60 Members is nowhere near enough. The Richard commission argued strongly for it. This is a very small number of Assembly Members who are not in the Government to carry out the processes of scrutiny. I remember raising this with the previous Secretary of State but one and inquiring why the Welsh Assembly did not have more powers. She observed that the public mood did not favour having more paid officials. I recall asking her why in that case the Government had suggested creating 300 more paid politicians in the upper House, but there was not a response to that.
I think that the length of the Assembly should be determined by the Assembly; it should not be told by another body for how long it should conduct its operations. As a responsible and dignified body, it should decide for itself.
On the policy changes, much has been said about the borrowing powers. That is the central feature of the Bill and will enable the Welsh Government, or should enable them, to take on far greater powers to improve the economy and infrastructure in Wales. The borrowing amount of £500 million is, as was said, far too timid—I think that “chicken feed” was the expression that I heard on my left, which seems rather accurate. It is based on a measurement which is different from that of Scotland. There is nothing divinely created about it and I am sure that it will be looked at. It is profoundly necessary after the public sector cuts that Wales has endured in the past four years that it should have the ability to expand through its borrowing powers. There is a stronger case now for greater borrowing powers because the Welsh Assembly is to have much greater powers and to be able to do more things. Silk has virtually argued that the same measurement should be used for Wales as for Scotland and I do not see why that should not be the case.
I welcome the thrust of the Bill on taxation. As we said in the debate on the Scotland Bill, there should be no representation without taxation. We now have powers for stamp and landfill duties, which will give the Welsh Government more of an independent income. On income tax, I would hope that the Labour Party, of which I am a member, would be less apprehensive. It was noted in the New Statesman a week or two back by Professor Adam Tomkins that the Labour Party had lost out in the debate on Scotland by being too timid and, having set up devolution, not spelling out what it was for. I hope that the Labour Party, which is, as it has always been, the dominant party in Wales—or has been since the First World War at least—would be less apprehensive about that. One can see the apprehension about tax competition and about the Treasury using income tax variations for its own purposes, but this is a matter on which the parties should be quite clear—for that matter, I support what the Labour Party has said about perhaps increasing to 15 pence the amount of income tax that could be devolved to Wales.
I do not think that we need a referendum. We have had quite enough referendums in Wales. The noble Baroness, Lady Morgan, showed proper apprehension at leading or even taking part in any such debate—it would be one of the lower turnouts on record. Politicians of both sides have been passing the buck on this one. There was no referendum in relation to the Calman proposals for Scotland. Why should there be for Wales? It is a humiliating cop-out—to use the vocabulary—which is unfair.
Lord Bourne of Aberystwyth
There was of course a referendum in Scotland which the Labour Party provided for when devolved taxation was introduced.
Lord Morgan
Yes, I accept that. At any rate, in this case, I think that the argument against a referendum in the Silk commission report is profoundly the case and I strongly support it.
What I think is quite wrong, however, is to have income tax devolved at all while the Barnett formula continues. The formula was shredded by the Holtham report; it was shredded by the House of Lords committee. I do not know whether a stop-gap can be well past its sell-by date but—if those metaphors are in any sense reconcilable—that is the main point that has come forward. We have had a conspiracy of silence on all sides about the Barnett formula. The Labour Party had one or two debates on it in this House which were not at all sensible. The Conservatives have had their own discussion which quite falsely linked the Barnett formula with the accumulation of national debt, which it has nothing to do with. The Liberal Democrats have not been particularly vocal on it. Plaid Cymru has attached the Barnett formula to an extreme version of Welsh nationalism not particularly favoured since the days of Owain Glyndwr. UKIP has attached it to English nationalism, which seems to be equally unfortunate. In a way, the “none of the above” candidate would have a strong vote from me in that debate.
Proper government in Wales has been a long and hesitant process. It began in perhaps unlikely fashion with the demon drink in 1881, when the Sunday Closing (Wales) Act began the principle of Welsh legislation. This Bill is a welcome milestone, but it needs a wider vision linking the arguments in Wales both with the important and highly relevant debates on independence in Scotland and with the forthcoming debate on a referendum for Europe, which may not come for two or three years but will most certainly affect the attitude of Welsh people towards devolution and towards participating in a United Kingdom where England is perhaps strongly Eurosceptic. Hence, Gordon Brown has urged that a new constitutional settlement be adopted to bring together all these different themes and to make, as I have suggested, the Scottish Parliament and the Welsh Assembly permanent and irreversible.
This Bill shows how Wales has been a casualty of the process of stop-start change that we have had on constitutional reform for many years. The constitution has been correctly described by Professor Anthony King of the University of Essex as a “mess”. Wales is one area that has suffered from this mess. I would hope therefore that the mess could be cleared up by having a constitutional convention to provide a holistic look at all these aspects: the union in this country; the union with Europe; and the relationship between the different nations within the United Kingdom. I hope that we will have a vision supplied—perhaps even by the Constitution Committee here, of which I shall not be a member—and that the people of Wales will benefit. Nevertheless, that this Bill is a very helpful and hopeful start is incontestable.
Lord Elystan-Morgan (CB)
My Lords, this Bill well deserves the support that is obvious for it in all parts of the House, in the main because it is a Bill that takes Wales further along the road to home rule.
Many Members have meandered down memory lane in connection with the events of past decades. They reminded me of the feelings that I have, and always have had since I was a young boy, about the attainment of a Welsh Parliament. It has been something of an obsession for me, and I make no apology for that. For many years—years of disappointment and frustration—it seemed like a distant dream, which would probably never be achieved.
All that changed in 1964, with the establishment of the office of Secretary of State for Wales. Before then it seemed that nothing in the way of substantial constitutional development was possible: after that, everything has been possible—that is, in so far as it is the will and the determination of the Welsh people to achieve it.
To some extent, the devolution in the 1997 referendum, and in statute thereafter, was not classic devolution at all, because it did not, in the main, entail the transfer of any substantial new powers to Wales. The powers had already been transferred, but they had been transferred to Welsh Ministers. What it did bring about, of course, was a significant transfer of power from Ministers to the people of Wales. It meant that, for the first time, one had a body elected by the people of Wales, meeting on the soil of Wales, and with a moral and legal authority to speak for Wales. Obviously, with the greatest respect, that authority had to be on a broader basis than that which could be enjoyed by any Minister of the Crown as such.
In the referendum of 2011 we had a very considerable devolution. That created, essentially, a Welsh Parliament —a lawmaking Parliament with wide legislative powers, falling into 20 separate broad categories. That presents a massive challenge. This Parliament of Westminster has had many centuries to evolve slowly, deliberately and securely, and to mould its traditions to meet the needs of various ages. We in Wales will be expected to achieve a great deal of that process within a very short compass of time.
That must always be remembered in the context of what is now a new body. It is the Assembly, but it is essentially a Welsh Parliament. I not only recognise, but am charmed by the fact, that it should be called the Senedd. I believe that it was the noble and learned Lord, Lord Morris, who set the precedent with his Bill in the 1970s, in which the name of the body was the Senedd.
Lord Thomas of Gresford
My Lords, I know that the Bill presented by Lord Hooson in 1967 contained the name Senedd; I drafted it.
Lord Elystan-Morgan
It did indeed. A few weeks ago I had the great honour of contributing a chapter on the political life of the late Emlyn Hooson, in which I made that very point.
There is therefore a respectable precedent for the concept of a Senedd. The word may, of course, have embarrassing connotations. As noble Lords will know, it comes from the Latin word “senex”, meaning an old man. The same stem is in the word “senile”—and also in the word “senior”. But—and I speak with some fervour and commitment in this matter—there is a great deal to be said for old men in politics.
The generality of the Bill is very much in the track of everything that has happened in the past 40 years, and especially in the past 17 years, since the referendum of 1997. I have little doubt that it shows that the curve of expectations and the curve of confidence that the Welsh people have in their own destiny has nobly sharpened during that time. I think that it will continue to do so.
It is in that context, therefore, that we look not only at what the Bill contains, but at what it does not mention. The main part of it, as we all appreciate, deals with the varied rate of tax that will be within the jurisdiction of the Welsh Assembly. I have a canny approach to such a situation, perhaps because I am a Cardiganshire man, and in Cardiganshire we have the tradition of being extremely careful in relation to money—a very laudable trait, if I may say so.
Of course the proposal has its attractions. Of course we will never be a complete and full home rule parliament unless we take up such responsibilities. But after all, we are being asked to invest in a future that is very uncertain. We are being asked to buy stock, as it were, in a new enterprise—but the prospectus is very nebulous. What do I mean by that? I refer, first, to the lock-step. That could dominate the whole situation. With a lock-step imposed on the three bands of taxation, it might be difficult to impose a progressive tax. The Silk commission—I too applaud the efforts of people like the noble Lord, Lord Bourne, in this context—was strongly for that. It argued the case to the point where there was no answer to it. Nevertheless—due, no doubt, to influences from beyond the Tweed, and for reasons connected with Scotland—there is dubiety at this moment. Until that dubiety is resolved, we cannot really begin to think about the question of whether Wales should take up these powers.
There is also the question of Barnett. In passing, may I say that we hope that the noble Lord, Lord Barnett, will soon be restored to full health in this place; he is a gentleman of remarkable qualities, and I have enjoyed his friendship for more than 40 years. However, the losses under the Barnett formula have been enormous, as the noble Lord, Lord Wigley, has already proved. The commission chaired by Gerry Holtham made it abundantly clear that every year, Wales loses—or did lose when the report was published, three years ago—some £300 million. As the economy improves, that loss becomes greater. It is a disgraceful situation, for which Governments of both colours over the past 30 years are responsible, because they have been unwilling to look into the inequity of the arrangement. A small country like Wales simply cannot afford this massive haemorrhaging of assets, which will continue unless something drastic and radical is done about it.
As for the main proposal in the Bill—yes, there are possibilities, but there are also dangers. There are matters that have to be spelt out. I cannot for a moment see the Welsh people accepting it until they have some sort of reasonable guarantee that we will be no worse off if we take up those options. Hazlitt said that there are only two certainties in life: death and taxes. As for death, this House may very well do something about its certainty, but as for taxes, they will remain exactly the same, and for ever.
Of course it will be difficult for a referendum to be carried if there is still a tinge of uncertainty. Gerry Holtham said to the Welsh Affairs Committee that the referendum is very losable unless those guarantees are in place.
I turn to two other matters that are not in the Bill. One is the membership of the Assembly. I do not think that I can overemphasise that feature. The noble Baroness, Lady Humphreys, has already spelt out the case, a case set out excellently in the publication by the Electoral Reform Society Wales. The facts, briefly, are these. In Scotland, there are 128 Members of the Scottish Parliament; in Northern Ireland, there are 108 Members of the Assembly; in Wales, there are 60. Once you take out the Ministers, Deputy Ministers and Officers of those various Houses, you have this result: in the House of Commons, 525 Back-Benchers; in Scotland, 113 Back-Benchers; in Northern Ireland, 92 Back-Benchers; in Wales, 42 Back-Benchers. That is well below the minimum number that can form a reasonable critical mass to carry out that function.
Edmund Burke said that, for evil to triumph, it is necessary only for men of good will to do nothing. If anyone wants to bring about the evil of destroying the very future of the Welsh Assembly, and everything that is possible within its grasp, all you have to do is to do nothing in relation to that membership. It is simply impossible for it to carry on with that small number. The Electoral Reform Society has argued strongly the case for 100 Members. It has carried out surveys in all parts of the world and found that that is about the average for what might be called a sub-parliament of this nature.
For myself, I would ask people to exercise a bit of faith and imagination, to consider how that rising curve of expectation that we have seen in Welsh constitutional development over the past 15 years might continue, and to say that 120 might not be impossible. The beauty of the figure of 120 is that it is very simple: you simply double the number of Members that you have at present.
I turn briefly to the question of reserved powers. It is simply ludicrous that if a person wants to find out whether or not a particular function has been devolved to Wales, he or she might have to look at 600, 700 or 800 little pieces of constitutional confetti just to find out whether that matter has been transferred. That is no way to run a parliament. Indeed, by placing the situation on the basis of reserved powers, we place Wales in exactly the same position as Northern Ireland and Scotland. That would also save a whole generation of Welsh lawyers from acute constitutional neurosis.
Wales stands at a point in time where there are many challenges, many dangers and many possibilities. This House must have heard the quote from the Bard of Avon very often:
“There is a tide in the affairs of men
Which, taken at the flood, leads on to fortune;
Omitted, all the voyage of their life
Is bound in shallows and in miseries”.
There is a tide in the life of a small nation, as well, and we must do all we can to see that we do not miss that fateful opportunity.
Lord Rowlands (Lab)
My Lords, many Members of the House who have spoken today have referred to their personal position on devolution. It was a curious coincidence that, as I prepared my thoughts on the Bill, I had an e-mail from a sixth-former in West Wales, Eleri Williams, with a questionnaire. The first question was: had I been a supporter of devolution? I fear that I am in a minority of one in this afternoon’s debate, as I confessed to her and now confess to the House that I was a most reluctant supporter of devolution. That was, frankly, from personal experience as a parliamentary historian who then had the great privilege of sitting for 33 years in the other House, 29 of them representing an iconic Welsh constituency. The notion that I should share this responsibility was rather underwhelming, and the notion that I would lose any constituency responsibility for health, education and transport was very unappealing. That was one factor that led me to stand down in 2001.
However, unlike my noble friend Lord Morgan—Professor Morgan—I think that since then the settlement has benefited from being gradual. We can so easily forget how frail and fragile the support for the settlement was in the first place; it was a very marginal issue. I believe that the gradual approach has been important in allowing the Assembly to build support for the process and for itself. Because of where I come from—the position I take on devolution—I believe that we should not be obsessed by aping the Scots or following the Scottish line. We should shape our devolution settlement based on our political culture and our own demographic factors. That is extremely important.
However, I believe that we are at a stage when one extremely important change has to be made, to which—as, I confess, a reluctant devolutionist—I now give my wholehearted support. That is the whole issue of reserved powers. As a result of the changes that have taken place, this reform is now overdue; it is a most important reform that needs to be made. I regret that it is not in the Bill—not only that, but I am not certain where the Government stand on the issue. Are they just saying that they do not have time to include those proposals in the Bill? Do they support in principle the idea that we should have reserved powers? That is an area that we will need to explore in Committee, because it is becoming extremely important. The case was powerfully made by my noble friend Lord Morgan earlier. That is certainly an issue that we shall pursue in Committee.
The next question that Ms Williams posed to me in her questionnaire was: what did I think about the electoral system? I explained to her that it had been designed primarily because of the fear that the Labour Party would dominate the Assembly if there had been a completely first-past-the-post arrangement, so the electoral system had been successful because there has not been a dominant party. I did have to say, however, that I thought that Clause 2, reversing the ban on dual candidacy, was foolish. I recall vividly the reaction, certainly in our area in West Wales—in the 2003 election, I think it was—to the notion that people who had lost an election should then be elected as Members. Whether we are for or against that, I should much prefer Clause 2 to go and to insert a clause that states that the Assembly should make those decisions. Let the Assembly from now on determine the electoral arrangements. Why is this House going to determine whether dual candidacy is right or wrong? It should be the Assembly’s responsibility, and it would be preferable if we abandoned Clause 2 and introduced a clause that allowed the Assembly to determine its electoral arrangements.
The borrowing powers are important and I support them, as I support the two minor taxes, although, again, I hope that we scrutinise them in Committee, because from reading some of the Commons debates, I do not think that either clause was scrutinised in a proper fashion, and I believe it to be the duty of this House to do so.
On the question of taxation, having read the carefully considered argument that Silk produces, I accept his argument for tax-varying powers, but I hope that we do not become obsessed by them. It would be political surrealism to believe that Governments of whatever political hue will seize on and make dramatic changes in taxation. At best, I think that they will be marginal. As my noble friend reminded us from the Front Bench, a 1p change in tax one way or the other is worth £200 million—not insignificant, but quite insignificant in a budget of £15 billion. I would not wish hot-headed debates to take place on whether we should say yes or no to 1p when a bigger debate about the whole nature and contribution of the Budget and the priorities in that Budget should be centre stage.
I turn finally to a point made by a number of noble Lords: the concern I share about the potential pressures on the Assembly in terms of scrutiny. I had the privilege of sitting with my noble friend Lord Richard on the Richard commission. We spotted then and felt that there was not a robust enough scrutiny system and that this was related to the number of Members of the House. We are now 10 years down the road, the Assembly is accruing more and more responsibilities and powers, and the issue of the robustness of the scrutiny process is a major concern.
With a Welsh Treasury we will have debates on taxation and on public finance issues, so we should remember how powerful and important a role is played in the other House by the Public Accounts Committee, and how uncomfortable Governments have been made by an awkward bunch of Back-Benchers questioning and pressurising. It is one of the great committees of the House and is very effective. I just do not feel that there is the same sense of an awkward squad creating problems and making Governments of whatever party uncomfortable and I think that that is partly related to the size of the Assembly itself: there are not enough Back-Benchers. Therefore I believe that we should accept, as a consequence of the Assembly accruing ever more power, that it has to have the capacity to scrutinise that power, otherwise we will have government but not a democratically scrutinised Government.
It is interesting that there has been almost unanimity in this House—it is easier for us to say, because we are not elected. It is a problem to present an unpalatable case for more politicians, but the case has to be made. It has to be seen in the context of the further accrual, the development of the devolution settlement and the expansion of the Assembly’s powers.
I welcome parts of the Bill and certainly look forward to scrutinising it. I do not know whether I should lock-step or not lock-step; I shall work that out in the course of our debates—and as for indexation and all the other issues, they look like the grist of a good Committee stage. However, I plead that we will not miss, as the professor and noble Lord, Lord Morgan, said, the slightly bigger picture; in particular, the importance of the role of an enhanced National Assembly to deal with the scrutiny of these powers.
Lord Roberts of Llandudno (LD)
My Lords, it is quite thrilling to hear the unanimity of those who have spoken, and our support for the Bill. We should show our appreciation of those who went before us and who fought on these issues, such as the noble Lord, Lord Prys-Davies, and the late Lord Richard Livsey, who were here for the last major debate on Welsh government. Perhaps we can send Gwilym Prys-Davies—he is still alive, you know—our regards at this time. There are others one cannot name.
I was going to spend a long time arguing that we should increase the number of Assembly Members from 60 to 80. I do not need to do that; the case has already been made. What we have to do now—and here I shall come into conflict with one of my colleagues—is to decide how we are going to reach that figure of 80. In Scotland, of course, we have the single transferable vote for local government. I have fought for this all my life. I do not know whether I would win the argument in this House, but certainly I might try it. At the moment, we have 40 constituencies, each electing one Member by first past the post. The remaining 20 are in five regions and, in order to get some proportionality, we have the sharing of the vote there, which seems to work quite fairly—as fairly as anything we could devise at present. One suggestion was that there should be two-Member constituencies. Let me give one or two examples.
The noble Lord, Lord Rowlands, of course, represented Merthyr Tydfil, which used to be a two-Member constituency. The Tories never stood a chance there. It was always Liberal, and elected Keir Hardie. It never gave the minor party any chance at all. It had gone, of course, by 1929. The only one I can cite at the moment is Blackburn. In 1929 Blackburn was a two-Member constituency. Both socialists were elected and they polled 37,000 and 35,000 votes, but the Liberal and the Conservative polled 35,000 and 34,500 votes. It was winner takes all. To have that sort of arrangement would not be democratic or representative at all. We get it in local government sometimes. We get two-member wards and three-member wards and it is usually the same party that takes all the seats. I do not think that that is going to be acceptable to this House or to the people of Wales.
Lord Wigley
When I spoke earlier noble Lords may recall that I, too, had a preference for STV as a system, but I put forward the idea of two Members to each constituency—in the context not of an 80-Member Assembly but of a larger Assembly where there would still be a list, a presence that would bring proportionality or at least something approaching it.
Lord Roberts of Llandudno
I very much look forward to having the debate when we come to that amendment in Committee. I am sure that noble Lords see the argument that simply having two-member wards or two-Member constituencies would deny us fair representation.
We come then to the question which has been debated here, which says that a candidate cannot stand for a constituency seat as well as for a list seat. Delighted I am—that is a good Welsh way of saying it—that we are going to make it legal for a Member to stand for a regional seat, a list seat, as well as for a constituency seat. I do not quite agree with what the noble Lord, Lord Rowlands, said, that we simply do that so that those who are defeated at one level are successful at another level. Candidates are generally chosen for their profile and how they are able to contribute to the work of the Assembly if elected. What is wrong with trying to enable your most outstanding candidates to be elected on a first past the post system or a regional list system? We want the best people in the Assembly, and that is made easier by this recognition of dual candidacy.
In Wales, most of us vote for five different authorities: Europe, Westminster, Cardiff, the unitary authority and our community council. Are we voting too often? I am not going to deny anybody, but could we not merge the votes for, say, the community council and Europe, so that we do not go to the polls five times when we could have just the same democratic influence by going less often? I would even approve of elected local health authorities. I do not suggest that they be elected on another day, but that they could be linked so that we can make the most of these election days.
I now turn to finance and how the funding of elections and of constituency campaigns needs to be looked at in Wales. On the membership of parties, I do not have figures for Wales alone, but only those for the United Kingdom. In 1990 the Conservative Party claimed a million members. In 2011 it had 130,000 members. Membership has crashed, and not only there. In 1990 Labour claimed 311,000 members and this year it claimed 193,000 members. The Liberal Democrats had 77,000 members and now we have 49,000 members.
Diminishing membership means that fewer people are able to have more influence than before. The mass membership has gone. I remember being invited to speak to a women’s afternoon meeting—it was not Liberal, it was Conservative—and 300 people were going to be there. We do not have that now. You would have had fundraising with Christmas fairs, whist drives and regular party branch meetings, which brought in the money. Who pays now for the expenses of our candidates at elections? Where does their party funding come from?
The coalition agreement has a statement in it which refers to,
“reforming party funding in order to remove big money from politics”.
We need a thorough review of party funds. I have here the names of the top donors for one quarter of 2014. I will not read those names but one contributed £1.5 million to the Conservative Party—in one quarter. Two others contributed £500,000 each to the Scottish National Party while the unions, of course, contributed very generously to the Labour Party. Now, he who pays the piper pipes the tune, so we should look at this. Especially in a Welsh Assembly, who pays and where is the influence?
The turnout in Welsh Assembly elections has never been 50%. In 1999 it was 46.4%, in 2003 38%, in 2007 43%, and in 2011 41%. The decreasing turnout over the past 50 years at all elections is a dangerous signal indeed because it means that with small branch and party memberships, and those people who are generous in their party contributions, an unhealthy influence is possible. I have presented a Voter Registration Bill, which I hope will be debated in the coming Session. In February 1974, 70% of 18 to 24 year-olds voted in the general election but, of the 5.6 million young people in the UK at present, only half are registered to vote and of that number only 24% are certain to vote. Why is that? It is because millions of citizens, especially young people, see politics as boring, out of touch, elitist, corrupt, complicated and unrepresentative. Such a small number of people are holding the reins of power now but it does not have to be that way. Our democracy can, and should, be something that everyone understands and has a stake in.
The Bill which I have presented is aimed especially at teenagers, encouraging them to register to vote and encouraging electoral registration staff to work with schools to ensure that every possible student is registered to vote. Northern Ireland already leads on this, where it is a schools initiative. As I will propose in the Bill, Wales needs this new way of registration to encourage all our young people, as well as everybody else who is eligible to vote, to cast their votes. The Welsh Assembly must belong to the people, not to a small number of them. It must be seen to be responsive to the people, not to small political parties or wealthy individuals. We have an awful lot to discuss on the coming Bill and I look forward very much to bringing these suggestions forward.
Lord Howarth of Newport (Lab)
My Lords, in a democracy, decisions ought to be taken at the level closest to the people whose lives they affect. The principle of subsidiarity is right, the moral and emotional case for devolution is powerful, and I support the Bill. But how to design a model of devolution in practice is far from straightforward. Politics is about reconciling and balancing different interests. How much devolution, and what kind of devolution, is in the interests of Wales and is in the interests of the United Kingdom? A wisely designed model of devolution—the holy grail—would strengthen both.
The first requirement is that the model of devolution should be clear, which is why I agree with many noble Lords who have spoken that it is now time for Wales to have devolution on the reserved powers model, not on the conferred powers model which leads to disputes in the courts and creates profound uncertainty. Silk was clear about this but the Bill, disappointingly, fails to address it. In this regard, Wales should be placed on the same footing as Scotland and Northern Ireland.
As my right honourable friend Peter Hain once remarked, devolution is not an event but a process, and the people of Wales have now made up their mind, after much initial hesitation, that they like devolution. They are glad that they have it and, as the noble Lord, Lord Elystan-Morgan, said, they have advanced up the curve of expectation and confidence. Wales is not Scotland, but if the people of Wales want no less devolution than is allowed to the people of Scotland, they should have it. But of course that raises the question: what do the Scots themselves want? And, as we consider these matters, what is in the interests of England, which is a thought all too commonly absent in debates on devolution? How can devolution strengthen the United Kingdom in the interests of all? Vague and open-ended promises of devo-max made by political leaders in the run-up to the Scottish referendum do not seem to be a responsible or satisfactory way to proceed. How is all this going to end?
Most of the wider constitutional issues that were considered in Silk Part II have been deferred to the other side of the Scottish referendum on 18 September. But perhaps after that, people will start to suggest that they ought to be deferred beyond a possible referendum on the United Kingdom’s membership of Europe. The noble Lord, Lord Wigley, stressed the importance to Wales of membership of the European Union. It is never the right moment to decide what the next stage of devolution should be but it is good that the Government are proceeding in the Bill. We should proceed where there is sufficient consensus both within Wales and across the political parties in the United Kingdom.
Although the constitutional issues have been largely deferred, there are provisions in the Bill on elections. The Bill would bring back dual candidacy: the right of a candidate to stand both in the constituency election under first past the post and on the regional list. As my noble friend Lord Rowlands has just recollected, the origin of these mixed elections was the recognition by the Labour Government in 1997 and 1998 that a Welsh Assembly elected solely by first past the post would, given the political patterns of Wales, be Labour-dominated for as far as the eye could see. It was Aneurin Bevan who remarked that “the purpose of getting power is to be able to give it away”, but that magnanimity is all too rare in politicians. It was found, however, in Ron Davies, the Secretary of State for Wales at that time, who believed that it was right to create a Welsh Assembly that would be in some sense ecumenical.
It is of course right that the parties should contest elections under both systems but I strongly believe that it is inappropriate that individual candidates should be able to run simultaneously under both systems. That being permissible, we got the absurd situation in the Clwyd West election in which all four first past the post candidates were elected. That can hardly have encouraged political engagement. Why bother to vote at all if everybody gets in? The noble Lord, Lord Bourne, observed that the people of Wales were not confused about this. No, I do not think that they were confused but simply that they were shocked, and the abuse got worse because those who had been elected on the regional list system then used publicly provided funds to set up constituency offices to establish a power base in the constituencies which they were targeting.
The noble Lord, Lord Wigley, said that the Labour Party’s objection to the restitution of this state of affairs is—and I wrote down what he said—naked party-political jiggery-pokery. I was going to refrain from mentioning in my remarks the scandal of Leanne Wood’s leaked memorandum to Plaid Cymru candidates in 2003 but, provoked by the noble Lord, I think it right to remind the House of it because not all noble Lords may be familiar with what she said in her missive to them. She said:
“We need to be thinking much more creatively as to how we … use staff budgets”—
those are budgets provided by the taxpayer—
“for furthering the aims of the party”.
She went on:
“Regional AMs are in a unique position. They are paid to work full-time in politics and have considerable budgets at their disposal. They need not be constrained by constituency casework and events, and can be more choosy about their engagements, only attending events which further the party’s cause. This can be achieved by following one simple golden rule: On receipt of every invitation, ask ‘How can my attendance at this event further the aims of Plaid Cymru?’ If the answer is ‘very little’ or ‘not at all’, then a pro forma letter of decline should be in order”.
This is a scandal that in the annals of political scandal should be in red letters and I hope that it makes even the noble Lord, Lord Wigley, blush. It is now a further scandal that the political parties which are the minority parties in Wales are using the majority that the coalition provides for them in Parliament at Westminster to take powers to resume these abuses. They are shameless about it and what they are doing will be seen for what it is. I agree with other noble Lords—my noble friend Lord Rowlands among them—that the Welsh Assembly and the people of Wales should decide their own electoral arrangements.
Lord Wigley
I noted the way in which the noble Lord nipped out quickly to get a copy, quoting from an earlier debate. The question I want to put is this. Would he apply the same change to Scotland now, given the political arithmetic there?
Lord Howarth of Newport
We are considering the political arrangements that are appropriate for Wales. For all the reasons that I have already indicated, it must be wrong in principle; but here we are focusing on the question of Wales.
The core of the Bill is fiscal devolution. It is anomalous that devolution should have created an Assembly and a Welsh Government that apply policies in Wales but do not raise taxes to pay for them in Wales and do not have the close accountability to the people of Wales that levying taxes creates. The fact that that was part of the initial structure of devolution reflects the early diffidence in Wales about devolution when the referendum was won by only a hair’s breadth in 1997.
The taxes that it is now proposed to devolve will be no cornucopia for Wales. Public expenditure in Wales runs at perhaps twice the level of the net tax receipts that the Welsh Government are able to spend. It is quite right that business rates should be determined by local authorities in a system negotiated with the Assembly and the Welsh Government, but that is not going to be a bonanza for Welsh local government. Stamp duty land tax is highly erratic in its yield. Is it intended that the block grant should rise and fall with the fluctuations in the yield of stamp duty land tax? If it is not, we are going to see some fairly halting progress in the kind of capital programmes that the proceeds of that tax should be able to fund. From the last figures that I saw, the yield of stamp duty land tax in Wales was only some £200 million, in contrast to London, where it is in the order of £2 billion. The Mayor of London is asking that that tax be devolved to himself and the Greater London Assembly. That raises the question of how long we can expect London to be willing to subsidise Wales on the scale that it does at the moment. Londoners may want to see Wales raising some of its own money.
I understand that the landfill tax will be a diminishing source of revenue.
Lord Thomas of Gresford
The Barnett formula clearly applies to Scotland and Wales and the reform of it is linked. Does the noble Lord wish to postpone reform of income tax in Wales, or the collection of income tax in Wales, until that whole problem has been resolved?
Lord Howarth of Newport
These issues need to be addressed together. I am hoping to say something about the Barnett formula in a moment.
The devolution of tax, as we know, is to be linked to the question of borrowing powers. The ratio of borrowing permitted in Wales will be the same as the ratio of tax devolution. Borrowing is to be heavily circumscribed by the Treasury in the existing situation—up to £500 million to cover volatility in tax receipts and another £500 million for capital expenditure. That will be increased only if Wales assumes further responsibilities for taxation within Wales. Clearly, the Treasury does not believe that the purpose of power is to give it away.
The situation in Scotland is different. The Scottish Government can borrow up to 10% of their capital expenditure. It seems unfair that there should be lower limits on borrowing powers in Wales, created by this link to income tax. The scope to raise income tax is lower in Wales than it is in Scotland. I agree, therefore, with the Labour proposition that, if the people of Wales wish it, they should have the power to vary income tax to 15%. This question of borrowing powers is absolutely crucial.
The consequence of the arrangements proposed in the Bill is that Wales is placed in an unfair bind and faced with a very difficult dilemma. The noble Lord, Lord Thomas of Gresford, has just drawn our attention again to the Barnett formula. These issues need to be resolved together, particularly against the background that the Welsh budget has been heavily cut by £1.6 billion, and in terms of capital resources cut by 31%, as my noble friend Lady Morgan said. The people of Wales, with lower living standards and a lower taxable capacity, are being told to service borrowing in order to pay for projects that previously would have been funded from the Exchequer. The people of Wales are also being asked to pay for projects, such as the improvement of the M4, which are not just infrastructure for Wales; they are infrastructure for the whole of the UK. When it comes to the referendum, the people of Wales will want to think whether they are being asked to buy a pig in a poke.
The power that the Scots have to vary income tax has not been used over 15 years. The difficulty for a devolved assembly or parliament is that they are politically damned if they do and politically damned if they don’t. There are very difficult problems about introducing differentiated tax rates within a country as geographically compact and economically integrated as the United Kingdom. Wales will experience that more intensely than Scotland because of the permeability of the border and the much greater involvement between the people of Wales and those who live across the border in England.
What matters? Is it the specific powers that are devolved, or that there should be policies that on the part of the United Kingdom as a whole will enable Wales to be more prosperous, that will be fair as between Wales and the rest of the United Kingdom, and will enable Wales to play a strong part in the United Kingdom? There is a large gap between revenue and expenditure in Wales. Wales needs the continuing willingness of taxpayers in England to continue to support it. Some 40% of GDP in the UK is generated in London and the south-east. There are very significant risks for Wales if it embraces the opportunity of developing its own policies on income tax. Above all, Wales must not lose the willingness of the United Kingdom, and England in particular, to continue to redistribute. Wales therefore needs a Government with a vision for the United Kingdom as one nation, a nation consisting of proud regions and nations within it, and a Government who do not disparage the achievements of Wales in education, health and housing. Wales needs a Labour Government who will offer devolution that is not meagre and mean and that will enable Wales to thrive within a thriving union.
Lord Rowe-Beddoe (CB)
My Lords, I broadly welcome the Bill as a major step in the slow yet maturing process of devolution. The words of the noble and learned Lord, Lord Morris of Aberavon, are most wise in his assessment of the whole process, particularly on reserved powers. A number of noble Lords have referred to that feeling this afternoon.
However, when it comes to the elephant, as it has been described, I think that there is actually an entire zoo in the Chamber. The elephant in this room is of course the Scottish referendum. Whatever the outcome of that referendum, life will certainly never be the same in the United Kingdom. I am of the firm opinion that there will be major constitutional change over the next few years. A noble Lord, whose name I did not get, said, “What about England?”. Indeed. That is a whole new issue, which I am sure will be addressed at another time. I certainly do not wish to rehearse any further argument in that regard, but it is somewhat overhanging and must overshadow our attitude towards the Bill over the next few months.
I declare an interest as chairman of Cardiff Airport, which was acquired by the Welsh Government in March 2013. In that context, we are particularly concerned about the asymmetric impact of airline passenger duty on both domestic and international connectivity. I fully endorse the Silk recommendation in that regard and fully support the case for this fiscal power to be devolved. I intend to return to this subject in greater detail in Committee.
The noble and learned Lord, Lord Morris, is no longer in his place, but he tested my memory of 14 years ago, which I think will fail, in so far as if I were to dig into the back of my mind and take account of inflation, I do not think that the Welsh Development Agency’s powers were much less than what is proposed today, if at all. I will be a little more precise in Committee.
However, and it is a big “however”, the increased powers envisaged in the Bill, the other powers discussed in the Chamber today and, indeed, each step of devolution of power place greater responsibility on the Welsh Government. These steps must therefore be accompanied by greater accountability, scrutiny and transparency. These essentials cannot be undertaken with the rigour demanded by the present 42 Assembly Members who are not in the Government.
Already the strain imposed is creaking. Dame Rosemary Butler, the Presiding Officer of the Welsh Assembly, said less than a year ago:
“There are only 42 Members to scrutinise £15 billion of taxpayers’ money, and to scrutinise the government on the big issues of the day—the future of our health service, our education system and the economy. On top of that they have to make sound, thoroughly scrutinized laws for our nation. A quarter of those 42 members sit on three committees, half sit on two. One would simply not find the same level of workload on Members in Westminster, Holyrood or Stormont”.
I therefore conclude that the logic is correct and Wales will need more Assembly Members in order to perform scrutiny effectively and to be seen to be effective, and to provide the necessary assurance to the people of Wales. I realise that my firm support for increasing the number of Assembly Members in my homeland will not necessarily lead to unparalleled joy by certain of our fellow countrymen. However, let us please remember: more responsibility, more accountability and more scrutiny. How the additional Members are elected is clearly an issue for the future.
I turn to a point made by the shadow Welsh Secretary in the other place, in his Third Reading speech:
“We still do not know whether the block grant will be eroded over time. Initially, it will be protected, but the Exchequer Secretary told us again here today that if Welsh gross domestic product and revenues grew more slowly than those of England, Wales would have less money over time to spend on vital public services”.—[Official Report, Commons, 24/6/14; col. 281.]
Chapter 16 of the report of the Silk commission states that,
“transfers of powers should be accompanied by (and be conditional on) transfers of funding being fully agreed between the two Governments in each case, and by agreed changes to the Barnett formula comparability factors”.
Comparability is neither the issue nor the answer.
I return for a moment to your Lordships’ Select Committee on the Barnett Formula, chaired by the noble Lord, Lord Richard, who is unfortunately no longer in his place, on which I had the privilege to serve in 2008. Our findings were published more than five years ago. The attitude of successive Governments—and I look to both sides of the House, including the elephant in the middle—has been to shirk their responsibility. There has not been a single serious debate. Wales has been grossly underfunded over the last 10 years, if not more. Until that is confronted by a Government with the guts, if I may use that unpleasant word, to face it in this Chamber and do something about it, that will obtain. It is ridiculous. We know why Wales is underfunded, of course. I shall not mention the unmentionable. It is because a large part of the United Kingdom has been grossly overfunded for the same period of time.
This formula has been in existence for the past 35 years. There has been no real engagement by political parties in this Chamber or in the other place with discussing the detailed analysis that your Lordships’ Select Committee undertook or the recommendations that we provided. It is deplorable. There has been no review or revision of this formula for 35 years because it is political dynamite. That is the answer—or is it because of political cowardice?
Wales is, and has been, underfunded. The all-party committee of your Lordships’ House unanimously determined that central funding should be based on an explicit assessment of relative needs. Administrations with great need therefore receive more money; Administrations with lesser need will obviously receive less. Your Lordships’ committee recommended, for example, that an expert body be formed—perhaps called the UK funding commission—to determine relative needs by using a small number of need indicators, which the committee identified. That is not unusual; it is in fact similar in principle to the Commonwealth Grants Commission of Australia, which performs this function of the distribution of central federal funding annually.
The formula is inequitable. We can talk around it, we can talk about this and we can devolve this, but there is a central grant and it is inequitable as far as Wales is concerned. It should and must be changed. Where are we? I am still waiting for a political party to grasp the nettle, as are, I am sure, many other noble Lords.
I conclude by quoting our chairman, the noble Lord, Lord Richard, and the noble Lord, Lord Barnett, after whom the formula was named, much, I think, to his embarrassment, as he would say if he were in his place today. The last five lines of his oral evidence to the committee are very moving and I would like to share them with you. Our chairman, the noble Lord, Lord Richard, said:
“You devised a mechanism which you hoped would last for a few years. You did not expect it to last for as long as it has lasted. You are not sure now whether it is based on the right criteria and you lean towards having, among other things, a needs based assessment. Is that fair?”.
The noble Lord, Lord Barnett, said: “That is fair”. I think that we need to address that, sooner rather than later.
Lord Anderson of Swansea (Lab)
My Lords, it is always a pleasure to follow the noble Lord, Lord Rowe-Beddoe, who brings a reservoir of experience on the Welsh Development Agency and in public work in Wales generally. I agree with much of what he said about the scrutiny function, which, because of the increased responsibility of the Assembly, surely demands increased numbers. I also agree with him on Barnett—it was only to be temporary but it remains. I think he would probably not deny being a politician, but he must understand that, certainly in advance of the Scottish referendum and the 2015 general election, it would be foolish to expect any change in the Barnett formula before that time, at the very least.
I join the chorus of consensus in relation to the Bill, but I confess I cannot join the Minister in referring to it as an “exciting package”. As I left my native Swansea on Sunday or Monday, I cannot recall the bells ringing. It is unlikely to excite anyone, I would think. It is fairly limited. I speak at the end of the list. All has been said and I know that the noble Lord, Lord Roberts, would agree if I make three pastoral points. My first point is a simple, general point. It is claimed that the Bill represents another milestone along the road, in the words of my noble friend Lord Morgan, who taught me my politics at the University of Wales. The problem is: where is that road leading? No one knows and no one has revealed that destination—a point, I think, also made by my noble friend Lord Rowlands.
I concede, of course, that the Assembly, having made a shaky start and having only just won the referendum in 1997 by a whisker, is now a fully accepted part of the Welsh political landscape and is doing well. It has pioneered several initiatives that either have been adopted or will shortly be adopted at Westminster. However, there is a professional temptation to stop devolution at Cardiff; perhaps any move to city regions will provide a new opportunity for devolution within Wales and not just to Cardiff. Perhaps the report of the Williams commission, which reported in January, will provide such an opportunity. I note that the First Minister said a few days ago that there will be an expedited consultation period by September with the proposals brought forward in October. With the 10, 11 or 12 new larger local authorities in Wales, there will certainly be a much greater opportunity for devolution within the Principality, accepting the principle of bringing more power closer to our people.
In the 1970s, when I was a member of the so-called gang of six, my concern was always the problems posed by devolution in a unitary state—problems which could be solved in a federal system with clarity in the division of powers. The problems of constitutional principle remain today. Clearly, in this country, we do not do constitutions. Hence, I now agree that there should be reserved powers rather than conferred powers to the Assembly, and I note what other Members of your Lordships’ House have said about the absurdity of the Wales Office losing, on a series of references by the Attorney-General, on the question of the competence of the Assembly. I would ask noble Lords to read the judgment of 14 July, in relation to the power of the Assembly to regulate agricultural wages, before the very strong Supreme Court. I also note that it did not matter in principle whether the subject—in this case, agricultural wages—might also be capable of being classified as relating to a non-devolved area.
For the moment, we are likely to see a continuation of a series of small steps. I think that my noble and learned friend Lord Morris of Aberavon used the phrase “drip by drip” in his excellent contribution—a little bit of this, a little bit of that, with perhaps air passenger duty relating to Cardiff airport being in the next drip which is coming along. The Scottish referendum, even with a no vote, gives an opportunity for a rethink in Scotland, and that is bound to have repercussions for Wales. The Strathclyde report, published in June of this year, recommended that 40% of Scottish expenditure should come from devolved income tax. I think that that will have substantial repercussions. Perhaps there is never an ideal time for making rules of this nature, but to do so in advance of the Scottish referendum is manifestly not ideal.
I will not quote it now, but I commend to the House the Financial Times editorial of 16 June headed “Towards a federal future for the UK”, which argues that Wales and Northern Ireland should gain similar enhanced powers to those likely to be granted to Scotland. A new constitutional settlement, I say in passing, might also include a more consensual reform of your Lordships’ House. If we are really keen about removing the metropolitan flavour of this House and wish to involve people in the devolved Assemblies and local authorities more, we might have some form of indirect election.
My second point is that the package of financial proposals is complex and subject to further consultation. The new borrowing powers are most important and welcome. What prevents these borrowing powers coming into effect sooner? Why should not the formula, as many colleagues have argued, be the same as for Scotland, which would more than double the amount of borrowing available to the Assembly? I have noted the current controversy in the Assembly about the amount to be spent on the road network around Newport. I hope that the Assembly will avoid the temptation, which perhaps we always have in Wales, of spreading the amount non-strategically in penny packets and look strategically at the needs of Wales. It may well be Newport this time—it cannot be Swansea—and may be north Wales next time. However, let us at least look strategically at the major problems that face us. The principle of increased responsibility for expenditure is absolutely right, but I do not believe that the relatively small sums involved will take us sufficiently far along that road for the linkage between elections and responsibility for expenditure to be clearly perceived by the Welsh electorate as a means of generally holding those who spend the money to account.
We also have to be very wary in Wales of fiscal competition with richer areas. I note that the Mayor of London has now proposed devolving receipts from stamp duty in London to the Greater London Authority. That sort of devolution to London which they may pick up from us could have very adverse consequences for Wales. I shall not mention the Barnett formula, or Holtham and the general underfunding of the Principality, and that the people of Wales clearly would have as a priority poverty, youth unemployment, health and education rather than tinkering with relatively small revenue-raising measures. The margin of variation of income tax after a referendum would be small, and it must be asked whether there is much incentive to vary in any event. If we do not vary, what is the point of the power in any event? I remind your Lordships that only about 4,000 taxpayers in Wales pay the top rate. I assume that most are fairly close to the English border; surely some work should be done now on how they are likely to respond to an increase or decrease in the Welsh element of income tax.
Apart from stamp duty land tax and landfill tax in Wales, the Bill also enables other taxes to be designated as “devolved taxes” through secondary legislation. It would be helpful to know what other taxes the Government have in mind. Some could be dangerous—for example, a hotel occupancy tax could hit the tourist areas in Wales very hard—so we have to be extremely careful.
My third and final point is on the dual candidacy rules. Such electoral arrangements should surely, as my noble friend Lord Rowlands said, be a matter for the Assembly in any event, and it is wrong in principle for us to intervene, as the Electoral Reform Society Cymru has said. One of the noble Lords opposite said, as did the noble Lord, Lord Wigley, that it was nakedly partisan of the Labour Government to have brought this forward. Let me list some of those nakedly partisan people that have opposed the dual candidacy. For example, the noble Lord, Lord Crickhowell, the former Conservative Secretary of State for Wales, said:
“The present arrangements are really pretty indefensible”.—[Official Report, 15/6/05; col. 1216.]
Again, the current Chief Secretary to the Treasury, Danny Alexander, said:
“I should also point out that the Secretary of State for Wales has said that if the Commission had considered what he called the systematic abuses carried out by list members in Wales, he would have reached the same conclusion that we have, namely that a ban on dual candidacy is the only effective solution”.
So much for the nakedly partisan nature of what the Labour Party has done—I think that this is good moment to call a cloud of witnesses in support of my contention.
I will not rehearse all the arguments, such as the Alice in Wonderland situation in Clwyd West in 2003, when there were prizes for everyone—everyone was a winner, as a fairground stallholder would say. I also note the Llanelli situation in 2003, which I witnessed, where the Plaid Cymru candidate, who had lost and was weeping copiously, then went half an hour along the road to Carmarthen and exulted at having won a position on the list.
The defence of the proposed change—proposed by some—is that it enables candidates to stand in both constituencies and on the regional list because the pool of able people in Wales, particularly for the smaller parties, is limited, and we should do our best to ensure that the best people find their way to the Assembly. It is surely a nasty slur on the people of Wales to say that we cannot produce sufficiently able people. I used to travel a lot when I chaired the Foreign Affairs Committee, and I recall the quality of politicians in Luxembourg, for example—pace Mr Juncker —and even in little Gibraltar. I used to admire the quality of the politicians there. We in Wales will not do worse than that. Is Wales so different? To quote, or misquote, the Reverend Eli Jenkins, “Thank the Lord we are a political nation”. Although I can see that there are arguments on both sides, I will certainly vote against the proposed change.
Overall, then, two cheers for the Bill, but I am still confused as to where such drip-by-drip Bills lead us: a brave new future for the Principality, or a constitutional labyrinth for our people.
Baroness Gale (Lab)
My Lords, it is a great delight and a pleasure to speak on behalf of the Opposition in this debate on the Wales Bill as we take our further steps on this journey of devolution which—as noble Lords who have taken part in today’s debate have outlined—we have been travelling along for many a long year. Many of those who have taken part in this journey—and some started way before I did, including my noble and learned friend Lord Morris and the noble Lord, Lord Elystan-Morgan—have shared with us their breadth of experience today. It has been said that we will have an exciting time as the Bill goes through, and I would not be surprised if we do. We have set the scene today for that.
We have had a good debate that has shown the breadth of experience that we have in Wales on all matters of devolution, and I thank all noble Lords who have taken part. I also thank the Minister for opening the debate and explaining so clearly what the Bill is about and the Government’s view on it. This is a small but important Bill. Its measures are important for Wales and devolution alike, and I am glad that today’s debate has provided testimony to that. However, we would like the Minister to answer a few points. As noble Lords have mentioned, the Bill has three parts: electoral arrangements, tax devolution and borrowing powers. We have five main points to ask the Minister on those areas and about how we can work to enhance the Bill, which we will want to examine further in Committee and beyond.
Labour’s five main asks are: first, that the Government accept the basic principle that Assembly elections are a matter for the Assembly itself—I will speak on that later; secondly, that the Minister explain why the Government are acting against their own and other evidence by removing the ban on dual candidacy; thirdly, that the Government make clear their position on tax competition and on whether, given recent changes in the Wales Office, for example, they still wish to start tax competition between the nations of the UK; fourthly, that the Minister explain how the Government arrived at the limit on capital borrowing and how that compares with the limit in Scotland; and, finally, that the Government consider enhancing the Wales Bill to include details of the next steps towards a model of reserved powers. I am sure that the Minister will deal with those points as we make progress during the Bill’s passage.
On Assembly elections, the Government have championed the greater responsibility that the Wales Bill will give to the Welsh Government. Yet, the very first part of the Bill is a change to Assembly elections that is being made through this Parliament and not through the Welsh Assembly. Many noble Lords have spoken on that, including the noble Lord, Lord Bourne, who gave his clear views; the noble Baroness, Lady Humphreys; and the noble Lord, Lord Thomas—who warned me this morning that he would attack the Welsh Government. He certainly lived up to that in his contribution. The noble Lord, Lord Wigley, also spoke about that issue. It was interesting that he also talked about the gender balance. I have previously heard the noble Lord, Lord Elystan-Morgan, say that it is impossible to carry on with the low numbers in the Assembly. In a previous debate he talked about 90 Members, but now he has mentioned 120. I was very interested that the noble Lord, Lord Roberts of Llandudno, said that we should have not a ban but the most outstanding candidates. I hope that we have outstanding candidates in Wales, whatever position they take and whatever the list or constituency. I have no doubt that we do, in all parties.
That poses a question. Why do the Government not allow the Welsh Assembly to set the parameters of their own election system? Why should the UK Parliament dictate to the Welsh Assembly what election method should be used? A number of noble Lords raised that issue in the debate. The Welsh Government believe that they should have the responsibility for this. In their response to the Wales Office Green Paper, they said that,
“no change to the Assembly’s current electoral arrangements should be made without the Assembly’s consent. This is the fundamental constitutional principle in issue”.
We agree with that fundamental principle, and it is disappointing that the UK Government do not share that view. We will continue to make what should be an uncontentious point—that Assembly elections should be a matter for the Assembly. We strongly believe that these matters should be decided in Wales by the Welsh Assembly.
A number of Members had views on dual candidacy. We think that the Government should explain why they are acting against their own evidence, and that of the Bevan Foundation, in removing the ban. Labour shares the wider concerns of the public that removing the ban is anti-democratic. Allowing losing candidates effectively to get elected by the back door is clearly not what voters want. At a time when voter engagement is low, having a system that allows losing candidates to be elected elsewhere will not instil confidence in the system.
It is not surprising that two significant surveys on dual candidacy found a clear majority in favour of the ban. One was the Government’s own consultation, the other a Bevan Foundation study. According to the Government’s consultation, a small majority was in favour of the ban on dual candidacy. The report states:
“In March 2013 the Secretary of State … announced the Government’s intention to remove the prohibition on dual candidacy at Assembly elections. A small majority of respondents to the consultation were in favour of retaining the ban, but the Government does not think that a strong enough case for this was made in the consultation responses”.
Why put the question, if the Government then ignore the answers?
The Explanatory Notes to the Wales Bill suggest that this change will benefit smaller parties in Wales:
“studies by the Electoral Commission and others … have demonstrated that the prohibition has a disproportionate impact on smaller parties who have a smaller pool of potential candidates to draw upon”.
That quote is from the Government’s own papers. We are changing the law because some parties cannot find enough candidates in Wales to field at election time. The only way round this is to allow them to stand in the constituency and in the list. Giving a helping hand to smaller parties is not a good enough reason for a change, as proposed in the Bill. Will the Minister explain why the Government are ignoring their own evidence by pressing ahead with what we believe is an anti-democratic change? Many noble Lords spoke about this and I know that there are strong feelings on both sides. We intend to pursue this in Committee, and I am sure that there will be further arguments and debate on it.
My noble friend Lady Morgan outlined our views on income taxation. As she said, it is probably the most controversial part of the Bill. We believe that the proposals outlined in the Bill on income tax devolution are not a priority and that there would have to be a referendum on it if it were brought about in the Welsh Assembly. Many noble Lords recalled today how we started on this journey. In 1979, no counties in Wales voted in favour. We made a progression as the years went by, after we recovered from that awful campaign— I think that both sides could use that term.
Lord Elystan-Morgan
I make one small correction: Cardiganshire was an exception. It did vote for it.
Baroness Gale
I thank the noble Lord for his intervention. He may be able to pull me up on other things. I know that he has a fantastic memory and experience in this field.
We believe that we should have a referendum on income taxation. Many noble Lords referred to the 1997 referendum. I worked hard on it, as did a number of other noble Lords. The Labour Party policy then was not like that for Scotland because Wales is not a mirror image of Scotland. We do not do things just because Scotland has done it. It might not suit our country. However, we do what is best for Wales. I am sure that others would agree that we probably would not have won the 1997 referendum if there had been a question on income tax in it. It was so close that we could not have included that. We have now progressed further and we will discuss it further. We agree with the Government that a referendum is needed on this. However, we support the other taxes—the landfill tax and the stamp duty land tax—as a means to give the Welsh Government borrowing powers. As my noble friend indicated, we will want to look at this again in Committee.
My noble friend Lady Morgan spoke about the borrowing limits and a number of other noble Lords have also referred to them. I have no doubt that we will debate them further as we progress through the course of the Bill.
It was interesting that many noble Lords felt that we should have the reserved powers. My noble friend Lord Rowlands said that he wished to explore this in Committee, and I know that we will. The noble Lord, Lord Wigley, my noble and learned friend Lord Morris and my noble friend Lord Howarth spoke about them, as did others. We want to amend the Bill to set in motion Wales’s move to a model of reserved powers.
The former Secretary of State was opposed to reserved powers. As a result, the Attorney-General referred Welsh legislation to the Supreme Court, at great cost to the taxpayer. The recent outright rejection of the UK Government’s challenge to the agricultural wages Bill by the Supreme Court made the case for reserved powers even stronger. With such a decisive ruling, we will once again be looking at ways in which we can persuade the Government to use this Bill to move to reserved powers. However, the next Labour Government will legislate to give Wales reserved powers. I look forward to what the Minister has to say on these matters, and I am sure that we will be discussing them at later stages.
This has been a very important debate and I am grateful for the opportunity to speak to the measures in the Bill. I hope that the Minister will be able to address the concerns that I have raised. We will continue to raise these concerns in Committee through to Third Reading in order to improve the Bill. We support a number of measures in the Bill but we believe that it can be improved. We will be tabling amendments which we hope will make the Bill more beneficial for the people of Wales.
I look forward to our further debates in Committee and at later stages. I am sure that we will have even more interesting and exciting debates and that we will conduct them in the spirit of today’s debate. I look forward to the following stages of the Bill and I now look forward to what the Minister has to say.
Baroness Randerson
My Lords, this has been a good debate. I believe that it has reflected the constitutional importance of the Bill for Wales and for the United Kingdom as a whole. I fear that at times it was a debate on a Bill that many of us would like to write rather than the one before us. As the Minister in charge of the Bill here, my first priority is to ensure that we steer the Bill through safely in the time that we have left in this Parliament. It is very important to me personally that we ensure that that is done because across the Chamber today I have noted very strong support for the Bill in general terms.
I am a devolutionary enthusiast but I am also a pragmatist, and I realise that in some ways the timetable is not ideal. As several noble Lords have mentioned, the Bill is being discussed in the shadow of the Scottish referendum, a point made powerfully by the noble Lord, Lord Rowe-Beddoe. We will then have our Committee stage very close on the heels of the result of the Scottish referendum without having time to reflect and to develop ideas. Therefore, I urge noble Lords to judge the Bill on the basis of where we are at present and the fact that it is being very firmly based on the Silk 1 report. The Silk 2 report is for another day and it needs to be considered in the light of our party manifestos. My party’s manifesto will contain a very firm commitment to delivering the Silk recommendations, and I hope that I will see things that I recognise in the manifestos of the other parties represented here today.
I shall try to reply to as many of the issues raised by noble Lords as possible. Many speakers, including the noble Baroness, Lady Morgan, and the noble Lord, Lord Wigley, mentioned the lock-step. It is clearly something that is going to continue to generate passionate debate. I said in my opening speech that the Government continue to believe that the approach set out in the Bill is appropriate for Wales, given the potentially far-reaching and significant effects of allowing the Welsh Government to alter each income tax band independently. That is our belief, particularly in the light of the porous border between Wales and England and the figures quoted by noble Lords indicating that there is a very large population that might cross that border.
The Government believe very strongly in the impact of the tax banding system on ensuring that taxation is progressive and that it reallocates money across society. That is an important aspect that we have been bearing in mind in relation to the lock-step. However, as I said earlier, at this point the Government remain open to revisiting the arrangements for income tax devolution in the light of changes in Scotland, and I am happy to restate that. I also draw noble Lords’ attention to the fact that the new Secretary of State has made it clear that his mind remains open on the issue.
The noble Lord, Lord Anderson, asked: if you do not vary the rate of taxation, what is the point of it? The point of it is that it is the basis for borrowing power. It is used as the basis for borrowing power by the Scottish Government and it would be used as such in future by the Welsh Government.
Several noble Lords, including the noble Baroness, Lady Morgan, referred to the level of the block grant adjustment. A number of different views were expressed on this across the Chamber. I make it clear that if the income tax base in Wales grows faster than that in the rest of the UK, the Welsh Government will benefit, even if the Welsh rate is the same as the UK rate. Inevitably, however, if it grows slower, the Welsh Government’s budget will be lower. That is a simple consequence of more accountability, linking the Welsh Government’s budget to the performance of the Welsh economy. This arrangement would incentivise the Welsh Government to grow the economy in Wales but, importantly, it would protect it from UK-wide effects that the UK Government are better placed to manage. It is a fair system, designed to protect Wales from the greatest volatility and it is consistent with our aims of increasing the Welsh Government’s accountability.
The noble Lord, Lord Howarth, asked about stamp duty land tax volatility. The block grant adjustment will not reflect SDLT volatility. Instead, the Welsh Government are being given new tools to manage tax volatility, which is part of increasing accountability. Those new tools include a cash reserve that can be used to save tax revenues in good years and spend them when revenues are lower than they have been forecast to be. The Welsh Government will also be able to borrow up to £500 million and up to £200 million in any one year if there are insufficient funds in the cash reserve.
The noble Baroness, Lady Morgan, and other noble Lords referred to the sensitivity of the timing of this debate in relation to the Scottish referendum result. I agree, but of course hindsight is a wonderful thing. When the timescale for the Silk process was set out, people did not have any concept that there would be a Scottish referendum at this time.
Many noble Lords raised the reserved powers model. I think that universal support for that has been expressed today across the Chamber. Several noble Lords, including the noble and learned Lord, Lord Morris, also referred to the recent decision on the Agricultural Wages Board. That decision certainly adds to the debate on the issue. However, as several noble Lords recognised and acknowledged, it has to be a longer-term issue. That was recognised by the Silk commission in its second report which made it clear that it was something for manifesto decisions. Even if we made the decision today to go to a reserved powers model, we would not be able to create it and legislate in the timescale left. It is absolutely right that there is a wide public debate on this and I urge noble Lords to encourage that debate.
In many ways the same points should be made about the size of the Assembly and its capacity for scrutiny. It was also an issue raised in the second Silk report, but that is also something for manifestos.
Lord Rowlands
Do I take it that, in principle, the coalition Government are in favour of the reserved powers?
Baroness Randerson
I am specifically making it clear that the Government do not have a position on the reserved powers model. As the Silk report recommended, this is something for manifesto positions from the different parties. However, my party is in favour of the reserved powers model. That does not make it a government position, and it certainly is not something that can be created now. However much one might wish to do so, we cannot write the kind of complex legislation needed for a reserved powers model of devolution for Wales. If we tried to do so at that speed, we would be in danger of ending up with second-rate legislation, which the people of Wales do not deserve.
I move on to the point made by the noble Lord, Lord Wigley, on corporation tax. I remind the House that the Silk commission said that if corporation tax were devolved to Scotland and Northern Ireland it should also be devolved to Wales. There are no current plans to devolve to Scotland and Northern Ireland. However, the Bill contains the power to devolve further taxes to Wales by order. I would like noble Lords to note that. The noble Lord, Lord Anderson, raised the same issue about the power to devolve further taxes. A good example would be the aggregates levy once the EU Commission has completed its investigations. That provision is in the Bill as it stands.
The noble Lord, Lord Howarth of Newport, and others, raised the issue of borrowing powers and why they are not higher. I should point out that there are two capital borrowing limits: the annual limit and the overall limit. The overall limit in Scotland is £2.2 billion, which is supported by around £5 billion of annual devolved tax revenue. Using the same ratio, the overall limit in Wales would have been only £100 million. I ask noble Lords to bear that in mind when they ask for Wales to be treated like Scotland. We accepted that £100 million was inadequate so we increased it to £500 million specifically to enable M4 improvements to be undertaken, although there are no restrictions in law on how that could be spent. Obviously this is a power in perpetuity which the Welsh Government could exert for other things.
Lord Wigley
I asked a specific question on that. If the cost of the M4 relief road around Newport is £930 million, or so, and the limit on the borrowing, prior to having a referendum that would enable more to be levered in, is £500 million, does the balance—the £438 million, or whatever the figure is—have to come out of the capital budget of the National Assembly, and does that mean that all the other projects that are being funded by that are lost?
Baroness Randerson
How the Welsh Government raise the additional money is, of course, entirely at their discretion. It could come directly from their capital budget or they could have a partnership with the private sector to ensure that additional funding is available for them.
Lord Howarth of Newport
Given that the M4 relief road around Newport is an infrastructural benefit to the United Kingdom as a whole, how much contribution are the Government of the UK planning to make to that very large cost?
Baroness Randerson
I think that the noble Lord raises a fundamental point about devolution. The control of building and road infrastructure in Wales is devolved. With it comes the Barnett consequential of the funding for infrastructure throughout the UK, which is reflected in the proportion of the Department for Transport’s budget that is devolved to the Welsh Government.
To complete the point I was making, we have agreed an annual limit of £125 million relating to borrowing in Wales. That limit was proposed by the Welsh Government. A lot of noble Lords referred to the Barnett formula. I remind them that the Holtham report recommended that Welsh funding should be between 15% and 17% above English funding. Funding in Wales is 15% above the funding for England at this time, so it is within the areas deemed as fair by the Holtham commission. That is not to say that it has been fair in the past; it is at the current point because there has been divergence in recent times rather than convergence. I remind noble Lords that in 2012 the Welsh Finance Minister Jane Hutt agreed with the Chief Secretary to the Treasury in an exchange of letters a system to review the situation in relation to Barnett if convergence was about to begin again. That system worked satisfactorily at the spending review last year and it provides a basis for fairness in the future. I am absolutely sure that noble Lords will return to this in the future and that we will be talking about it in some detail.
Lord Rowe-Beddoe
Is the Minister saying that the Barnett formula has been revised in the last 12 months?
Baroness Randerson
No I am not, but the natural process of the way in which the formula works means that in times of spending restraint, where we have been for the last four years, the convergence process, which worked over many years and made the formula more, shall I say, sparing in relation to Wales, ceased to operate and we have had divergence which has brought Wales to a position of greater fairness now than in the past. That means, however, that if we go back to times of financial plenty, there would be an issue once again. That has been recognised in the exchange of correspondence between the Chief Secretary to the Treasury and the Finance Minister in Wales.
In response to the general point made by noble Lords from the Labour Party about dual candidacy, as I predicted, when we read Hansard tomorrow it will appear as the most important matter in the Bill to members of the Labour Party. It is significant to remember that the purpose of doing this is to widen the pool of good candidates. Time and again people have raised the issue of how important it is to have scrutiny of the highest nature in the Welsh Assembly. It is not only a case of ensuring that there are more Assembly Members—whether you agree with that or not—but of ensuring that the best candidates can stand and get elected.
Many noble Lords on the Benches opposite referred to the Clwyd West situation. I refer to the Nick Bourne situation, if my noble friend will forgive me, where, as the leader of a party in the 2011 Assembly elections, he failed to gain a seat because his party had done so well. That is an anomaly, and it is important to bear in mind that within this system you will get that kind of anomaly. I say to the noble Lord, Lord Rowlands, who raised the issue of people who lose still getting into the Assembly, that that applies only if you think that elections should be on a winner takes all strategy. However, if you believe that elections are a way of ensuring that different strands of opinion are represented in our legislatures and Parliaments, you look at ways of ensuring that significant minority opinions are represented as well as majority opinions.
Lord Anderson of Swansea
The very able leader of a party in Wales lost under that system. The solution is simple: his party should have ensured that he sat in a winnable seat.
Baroness Randerson
There are many other answers connected with the problems and anomalies associated with that system. However, I repeat, this system was established by the Labour Party in the first Government of Wales Act. It may not be perfect but it provides an element of proportionality, although not perfect proportionality by any means. Even now within the Assembly, 50% of its members are from the Labour Party even though it gained under 40% of the vote. It is not perfect but it brings some proportionality to the Assembly, which was an essential part of getting the original referendum accepted by the people of Wales.
I conclude by saying that it has been a great pleasure to listen to the debate. I am sure that I will be answering in considerable detail the questions that I know noble Lords will put to me when we return from the Recess. I invite your Lordships to support the Bill.